Geron(GERN) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Geron Corporation's unaudited condensed consolidated financial statements and management's discussion for Q1 2022 ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents Geron Corporation's unaudited Q1 2022 condensed consolidated financial statements, including core statements and detailed notes Condensed Consolidated Balance Sheets This section presents Geron Corporation's financial position at March 31, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets | (In Thousands) | March 31, 2022 | December 31, 2021 | | :----------------------- | :------------- | :---------------- | | ASSETS | | | | Total current assets | $175,924 | $187,206 | | Noncurrent marketable securities | $10,945 | $28,651 | | Total Assets | $198,421 | $226,034 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $46,630 | $45,521 | | Noncurrent debt | $50,179 | $49,830 | | Total stockholders' equity | $97,487 | $126,416 | | Total Liabilities and Stockholders' Equity | $198,421 | $226,034 | - Total assets decreased from $226.0 million at December 31, 2021, to $198.4 million at March 31, 2022, primarily due to a reduction in marketable securities and cash/cash equivalents[12] - Total stockholders' equity decreased from $126.4 million to $97.5 million, largely driven by a net loss and other comprehensive loss[12] Condensed Consolidated Statements of Operations This section details Geron Corporation's financial performance for the three months ended March 31, 2022 and 2021 Condensed Consolidated Statements of Operations | (In Thousands, Except Share and Per Share Data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Royalties | $123 | $137 | | Research and development | $22,099 | $21,113 | | General and administrative | $6,699 | $7,478 | | Total operating expenses | $28,798 | $28,591 | | Loss from operations | $(28,675) | $(28,454) | | Net loss | $(30,098) | $(27,824) | | Basic and diluted net loss per share | $(0.09) | $(0.09) | - Net loss increased to $30.1 million for Q1 2022 from $27.8 million for Q1 2021, primarily due to higher R&D expenses and increased interest expense[15] - Research and development expenses increased by approximately $1.0 million, while general and administrative expenses decreased by approximately $0.8 million[15] Condensed Consolidated Statements of Comprehensive Loss This section outlines Geron Corporation's comprehensive loss for the three months ended March 31, 2022 and 2021 Condensed Consolidated Statements of Comprehensive Loss | (In Thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(30,098) | $(27,824) | | Net unrealized loss on marketable securities | $(539) | $(43) | | Comprehensive loss | $(30,636) | $(27,867) | - Comprehensive loss increased to $30.6 million in Q1 2022 from $27.9 million in Q1 2021, mainly driven by the higher net loss and a significant increase in net unrealized loss on marketable securities[17] Condensed Consolidated Statements of Stockholders' Equity This section presents changes in Geron Corporation's stockholders' equity for the three months ended March 31, 2022 Condensed Consolidated Statements of Stockholders' Equity | (In Thousands, Except Share Data) | Balance at Dec 31, 2021 | Net Loss | Other Comprehensive Loss | Stock-based Compensation | Balance at Mar 31, 2022 | | :-------------------------------- | :---------------------- | :------- | :----------------------- | :----------------------- | :---------------------- | | Common Stock Shares | 323,731,591 | — | — | 5,284 | 323,736,875 | | Common Stock Amount | $324 | — | — | — | $324 | | Additional Paid-In Capital | $1,398,006 | — | — | $1,707 | $1,399,713 | | Accumulated Deficit | $(1,271,741) | $(30,098) | — | — | $(1,301,839) | | Accumulated Other Comprehensive Loss | $(173) | — | $(538) | — | $(711) | | Total Stockholders' Equity | $126,416 | $(30,098) | $(538) | $1,707 | $97,487 | - Total stockholders' equity decreased by $28.9 million from December 31, 2021, to March 31, 2022, primarily due to the net loss of $30.1 million and other comprehensive loss of $0.5 million, partially offset by stock-based compensation[19] Condensed Consolidated Statements of Cash Flows This section summarizes Geron Corporation's cash flows from operating, investing, and financing activities for Q1 2022 and Q1 2021 Condensed Consolidated Statements of Cash Flows | (In Thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(33,974) | $(32,734) | | Net cash provided by investing activities | $30,427 | $38,083 | | Net cash provided by financing activities | $0 | $16,263 | | Net change in cash, cash equivalents and restricted cash | $(3,547) | $21,612 | | Cash, cash equivalents and restricted cash at the end of the period | $31,689 | $31,900 | - Net cash used in operating activities increased to $34.0 million in Q1 2022 from $32.7 million in Q1 2021, reflecting higher R&D expenses and headcount[22][132] - Net cash provided by investing activities decreased to $30.4 million in Q1 2022 from $38.1 million in Q1 2021, due to a lower rate of maturities than purchases of marketable securities[22][133] - No cash was provided by financing activities in Q1 2022, compared to $16.3 million in Q1 2021, which included proceeds from common stock sales[22][134] Notes to Condensed Consolidated Financial Statements This section provides detailed notes on significant accounting policies and financial statement components 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are unaudited and prepared in accordance with GAAP for interim information, with all necessary adjustments included[25] - The company consolidates its wholly-owned subsidiary, Geron UK Limited, translating its financial statements using local currency as functional currency and including translation adjustments in accumulated other comprehensive income (loss)[26] - Basic and diluted net loss per share are the same due to the anti-dilutive effect of potential common shares (stock options and warrants) during periods of net loss[28] - Marketable debt securities are classified as available for sale, recorded at fair value with unrealized gains/losses in accumulated other comprehensive income (loss). No other-than-temporary impairment charges were recorded for Q1 2022 or Q1 2021[32] - Revenue recognition follows Topic 606, involving a five-step process to identify contracts, performance obligations, transaction price, allocation, and recognition timing. Royalty revenue is recognized when related sales occur[37][45] - Research and development expenses primarily consist of costs for imetelstat development and potential next-generation telomerase inhibitors, including CROs, personnel, and manufacturing[48][112] Stock-Based Compensation Expense (Q1 2022 vs Q1 2021) | (In thousands) | 2022 | 2021 | | :------------- | :--- | :--- | | Research and development | $855 | $825 | | General and administrative | $837 | $969 | | Total stock-based compensation expense | $1,692 | $1,794 | - The company operates as a single segment focused on the development of therapeutic products for oncology[57] - The company plans to adopt ASU 2016-13 (Credit Losses) on January 1, 2023, and ASU 2020-06 (Convertible Instruments) on January 1, 2024, with no material impact expected on financial statements[59][60] 2. FAIR VALUE MEASUREMENTS This section details the fair value hierarchy and measurements for financial assets and liabilities Cash Equivalents and Marketable Securities at March 31, 2022 (In Thousands) | Security Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | | :-------------------------------- | :------------- | :--------------------- | :---------------------- | :------------------- | | Money market funds | $15,327 | $— | $— | $15,327 | | Commercial paper | $7,999 | $— | $— | $7,999 | | Corporate notes (cash equivalents) | $4,251 | $— | $(1) | $4,250 | | U.S. Treasury securities | $20,650 | $— | $(107) | $20,543 | | Municipal securities | $3,000 | $— | $(53) | $2,947 | | Government-sponsored enterprise securities | $6,500 | $— | $(39) | $6,461 | | Commercial paper (marketable securities) | $69,434 | $— | $(233) | $69,201 | | Corporate notes (marketable securities) | $47,417 | $— | $(279) | $47,138 | | Total | $174,578 | $— | $(712) | $173,866 | - Gross unrealized losses on cash equivalents and marketable securities at March 31, 2022, totaled $711,000, primarily due to changes in interest rates, and were deemed temporary[62][64] - The company sold all its equity investment in BARD1 Life Sciences Limited during Q1 2021, recognizing a net gain of approximately $1.2 million[73] 3. ACCRUED LIABILITIES This section presents a breakdown of Geron Corporation's accrued liabilities at March 31, 2022, and December 31, 2021 Accrued Liabilities (In Thousands) | (In thousands) | March 31, 2022 | December 31, 2021 | | :------------- | :------------- | :---------------- | | CRO and clinical trial costs | $22,567 | $22,804 | | Manufacturing activities | $6,846 | $4,123 | | Professional legal and accounting fees | $5,435 | $2,030 | | Interest payable | $393 | $336 | | Other | $555 | $541 | | Total | $35,796 | $29,834 | - Total accrued liabilities increased by approximately $6.0 million from December 31, 2021, to March 31, 2022, driven by increases in manufacturing activities and professional legal and accounting fees[74] 4. DEBT This section describes Geron Corporation's term loan facility and future minimum debt payment obligations - The company has a term loan facility of up to $75.0 million with Hercules Capital, Inc. and Silicon Valley Bank, with $50.0 million drawn as of March 31, 2022[75][76] - The loan agreement was amended in August 2021, increasing the minimum cash covenant requirement to $30.0 million (or $35.0 million with certain licensing transactions) starting June 1, 2022[75] Future Minimum Debt Payments (In Thousands) | Year | Amount | | :--- | :----- | | Remainder of 2022 | $3,527 | | 2023 | $25,440 | | 2024 | $33,200 | | Total | $62,167 | 5. CONTINGENCIES AND UNCERTAINTIES This section addresses ongoing legal proceedings, the COVID-19 pandemic, and geopolitical risks impacting the company - The company is a defendant in two consolidated securities class action lawsuits and seven shareholder derivative actions, alleging violations related to IMbark clinical trial disclosures[79][80] - The Court granted lead plaintiffs' motion for class certification in the securities class action on April 2, 2022, with trial scheduled for October 31, 2022[79] - The COVID-19 pandemic and the military conflict between Ukraine and Russia pose significant uncertainties, potentially causing disruptions and delays in clinical trials (IMerge Phase 3, IMpactMF) and impacting financial markets and the company's ability to raise capital[82][83][85] 6. STOCKHOLDERS' EQUITY This section details changes and components of Geron Corporation's stockholders' equity - The 2018 Inducement Award Plan has been amended multiple times, increasing the reserve of common stock shares to an aggregate total of 16,100,000 shares for inducement awards[87] 7. SUBSEQUENT EVENT This section describes a significant event occurring after the balance sheet date, specifically a public offering - On April 1, 2022, the company completed an underwritten public offering, issuing 53,333,334 shares of common stock and warrants to purchase an additional 53,809,524 shares (including a pre-funded warrant)[89] - The estimated net cash proceeds from this offering are approximately $69.7 million, excluding future proceeds from warrant exercises[89] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Geron's Q1 2022 financial condition, operations, liquidity, and funding needs OVERVIEW This section provides a high-level summary of Geron's business, clinical programs, and financial position - Geron is a late-stage clinical biopharmaceutical company focused on imetelstat, a first-in-class telomerase inhibitor, for hematologic malignancies, with two ongoing Phase 3 clinical trials (IMerge and IMpactMF)[93][97] - Top-line results for IMerge Phase 3 are expected in early January 2023, with potential U.S. commercial launch in lower risk MDS as early as H1 2024[94] - IMpactMF is expected to be fully enrolled in 2024, with interim analysis for overall survival potentially in 2024 and final analysis in 2025[95] - Imetelstat has received Fast Track designations from the FDA for lower risk MDS and relapsed/refractory MF, and orphan drug designations in the U.S. and EU for MDS and MF[97] - As of March 31, 2022, the company had $178.0 million in cash, cash equivalents, restricted cash, and marketable securities, with a $50.0 million long-term debt[99] - The company has an accumulated deficit of approximately $1.3 billion as of March 31, 2022, and has incurred significant net losses since inception[100] - Existing capital resources, including April 2022 offering proceeds and projected warrant exercises, are expected to fund operations until the end of 2023 (or Q2 2023 without warrant proceeds). Additional funding will be required to complete IMpactMF and planned exploratory studies[101] CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section discusses accounting policies and estimates that require significant management judgment - No significant changes in critical accounting policies and estimates occurred during the three months ended March 31, 2022, compared to the 2021 Form 10-K[103] - Management believes the condensed consolidated financial statements are fairly stated in accordance with U.S. GAAP, based on estimates and assumptions that may change over time[106] RESULTS OF OPERATIONS This section analyzes Geron's financial performance for the three months ended March 31, 2022, compared to the prior year - Royalty revenues were $123,000 for Q1 2022, a decrease from $137,000 in Q1 2021, primarily from sales of cell-based research products from divested stem cell assets[110] - Research and development expenses increased to $22.1 million in Q1 2022 from $21.1 million in Q1 2021, mainly due to higher personnel-related expenses from additional headcount[113] - General and administrative expenses decreased to $6.7 million in Q1 2022 from $7.5 million in Q1 2021, reflecting reduced consulting costs and lower legal fees, partially offset by higher personnel expenses[114] - Interest income decreased to $112,000 in Q1 2022 from $173,000 in Q1 2021, due to a smaller marketable securities portfolio and lower yields. It is expected to increase in the remainder of 2022 with new offering proceeds and rising interest rates[115] - Interest expense increased to $1.5 million in Q1 2022 from $743,000 in Q1 2021, reflecting interest and amortization of debt issuance costs/discounts under the Loan Agreement[116] - Net other expense was $56,000 in Q1 2022, compared to net other income of $1.2 million in Q1 2021, which included a gain from the sale of an equity investment[117] LIQUIDITY AND CAPITAL RESOURCES This section discusses Geron's cash position, funding requirements, and sources of capital - Cash, restricted cash, cash equivalents, and marketable securities totaled $178.0 million as of March 31, 2022, down from $212.7 million at December 31, 2021, primarily due to cash used in operations[118] - The company has a long-term principal debt balance of $50.0 million under the Loan Agreement[119] - In April 2022, a public offering generated approximately $69.7 million in net cash proceeds, excluding future warrant exercise proceeds[122] - Existing capital, including the April 2022 offering and projected warrant proceeds, is expected to fund operations until the end of 2023. Without warrant proceeds, funding is sufficient until Q2 2023[124] - Additional funding will be required to complete IMpactMF, planned exploratory studies (IMproveMF, AML, higher risk MDS), and commercialization activities for imetelstat[124] - Future capital requirements are uncertain and depend on factors like clinical trial progress, regulatory approvals, manufacturing costs, and litigation expenses[126][239] - Net cash used in operating activities was $34.0 million for Q1 2022, compared to $32.7 million for Q1 2021, reflecting increased R&D expenses[132] - Net cash provided by investing activities was $30.4 million for Q1 2022, down from $38.1 million for Q1 2021, due to a lower rate of marketable securities maturities[133] - Net cash provided by financing activities was $0 for Q1 2022, compared to $16.3 million for Q1 2021, which included proceeds from common stock sales[134] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Geron Corporation is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide disclosures about market risk[137] ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022. There were no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022[138] - No material changes in internal control over financial reporting occurred during the quarter[139] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal, risk, and exhibit details ITEM 1. LEGAL PROCEEDINGS Information regarding legal proceedings is cross-referenced to Note 5 of the Condensed Consolidated Financial Statements, which details ongoing securities class action and shareholder derivative lawsuits - Legal proceedings are detailed in Note 5 on Contingencies and Uncertainties[142] ITEM 1A. RISK FACTORS This section outlines various risks that could materially affect Geron's business, including development, regulatory, financial, and operational factors Risk Factor Summary This section provides a high-level overview of the primary risks facing Geron Corporation's business operations - Key risks include dependence on imetelstat's success, potential clinical trial delays/failures (including due to COVID-19 or military conflicts), need for additional funding, regulatory approval challenges, manufacturing reliance on third parties, intellectual property protection, intense competition, and ongoing litigation[148][149][150][151][152] RISKS RELATED TO THE DEVELOPMENT OF IMETELSTAT This section details risks associated with the clinical development, safety, and efficacy of imetelstat - The company's future success is solely dependent on imetelstat, its only product candidate, with significant risks in development, manufacturing, and commercialization[154][155] - Clinical trials (IMerge Phase 3, IMpactMF) face risks of interruption, delay, or termination due to factors like the COVID-19 pandemic, civil unrest, military conflicts (e.g., Ukraine-Russia), patient enrollment/retention issues, and regulatory clearances[157][158][161] - Imetelstat may cause undesirable side effects (e.g., hematologic toxicities, hepatotoxicity) that could delay or prevent clinical trials, regulatory approval, or limit commercial potential[165][166] - Flaws in clinical trial design, such as shortening the follow-up period in IMerge Phase 3, could reduce efficacy results and hinder marketing approval[171] - Results from earlier clinical trials (Phase 2) may not predict success in later Phase 3 trials, and preliminary data are subject to change and may be less positive in final analyses[173][174][178][179] - Reliance on third parties (CROs, investigators) to conduct clinical trials poses risks, as their failure to perform could delay or halt development[183][184][186] - The company will not control investigator-led clinical trials, and their data could show marginal efficacy or safety concerns, potentially impacting ongoing company-sponsored trials[189] RISKS RELATED TO REGULATORY COMPLIANCE MATTERS AND COMMERCIALIZATION OF IMETELSTAT This section covers risks related to regulatory approvals, commercialization capabilities, and post-market compliance for imetelstat - Inability to obtain and maintain regulatory clearances and approvals for imetelstat would severely harm its future value and the business[190] - Obtaining marketing approvals is a costly, lengthy, and uncertain process, with regulatory authorities having substantial discretion to delay, limit, or deny approval[195][197] - The company lacks experience in commercialization activities (sales, marketing, distribution) and may be unable to establish these capabilities or find suitable third-party partners, which would hinder successful commercialization[202][204][205] - Orphan drug designations for imetelstat (MF, MDS) may not be maintained, eliminating benefits like market exclusivity and potentially decreasing sales[207][208][209] - Fast Track and Innovation Passport designations do not guarantee marketing approval or faster development/review processes[211][213] - Failure to comply with ongoing government regulations post-approval (manufacturing, advertising, sales, labeling, distribution) could lead to severe penalties and adversely impact revenue[214][215][216] RISKS RELATED TO MANUFACTURING IMETELSTAT This section addresses risks concerning the manufacturing supply chain, third-party reliance, and cost-effectiveness of imetelstat production - Failure to establish and maintain a manufacturing supply chain for imetelstat, which is complex and relies on third parties, could delay or cease clinical trials and regulatory approvals[218][219] - Reliance on a small group of third-party manufacturers for starting materials, drug substance, and drug product creates risks of delays, shortages, and inability to meet quality standards or capacity needs[220][222][223] - Manufacturing oligonucleotides like imetelstat is expensive, and failure to achieve significant cost reductions for commercial use could impact profitability and market success[225] RISKS RELATED TO COVID-19 This section outlines the ongoing impacts of the COVID-19 pandemic on clinical trials, supply chain, and financial markets - The COVID-19 pandemic has negatively impacted and continues to affect clinical trial activities, causing disruptions and delays in patient screening, enrollment, site initiations, and monitoring visits for IMerge Phase 3 and IMpactMF[227][228][229] - Increased reliance on remote work due to COVID-19 could heighten cybersecurity risks and communication disruptions[227] - Supply chain disruptions, manufacturing delays (e.g., due to vaccine production mandates), and potential shortages of consumable supplies are ongoing risks[234] - The pandemic has increased market volatility, potentially limiting the company's ability to raise additional capital and adversely affecting liquidity[235] RISKS RELATED TO OUR FINANCIAL POSITION AND NEED FOR ADDITIONAL FINANCING This section highlights the company's need for substantial additional funding and risks associated with its financial position - The company requires substantial additional funding to complete the imetelstat program (IMpactMF, exploratory studies) and commercialization efforts. Existing capital, even with recent offering proceeds and projected warrant exercises, is only sufficient until the end of 2023 (or Q2 2023 without warrant proceeds)[237] - Failure to obtain additional capital when needed would force delays, reductions, or elimination of R&D and commercialization activities, potentially leading to cessation of operations[237][244] - Raising additional capital may result in unfavorable terms, dilution for existing stockholders, or restrictive covenants[241][242] - The company has no current product revenue, has incurred significant losses since inception (accumulated deficit of $1.3 billion), and may never achieve consistent profitability[245][247] - The ability to use net operating loss carryforwards and other tax attributes may be limited due to ownership changes or changes in tax laws (e.g., Tax Act, CARES Act)[248][249] RISKS RELATED TO OUR INDEBTEDNESS This section details risks associated with the company's debt obligations, restrictive covenants, and potential for default - The company's indebtedness under the Loan Agreement (secured by most assets excluding intellectual property) could adversely affect financial condition and make funding operations difficult, especially if Tranche C funds are not approved or available[252][253] - The Loan Agreement imposes restrictive covenants (e.g., minimum cash balance of $30.0 million from June 1, 2022) that limit operational and financial flexibility. Breach of these covenants could accelerate debt repayment[254] - Failure to make debt payments could result in default, allowing lenders to demand immediate repayment and exercise remedies against collateral, severely impacting the business[257][258] RISKS RELATED TO MANAGING OUR GROWTH AND OTHER BUSINESS OPERATIONS This section covers risks related to personnel, operational expansion, collaborative arrangements, and international business activities - The company's success depends on retaining and recruiting key personnel (executive officers, clinical, regulatory, manufacturing, sales, marketing) amidst intense competition, with potential for higher costs and impact from remote work[259][260][261] - Ineffective management of future growth, including expanding operations in multiple jurisdictions (e.g., UK subsidiary), could lead to operational weaknesses, compliance issues, and delays in business plans[262][263] - Imetelstat is the sole product candidate for the foreseeable future; failure to develop or commercialize it, or to successfully identify new candidates through discovery efforts, would severely harm the business[264] - Establishing future collaborative arrangements for imetelstat, especially outside the U.S., may be difficult due to competition, complex negotiations, and potential demands for relinquishing material rights or assuming significant obligations[265][266] - The company has no prior experience obtaining marketing approvals or commercializing products, making future viability difficult to assess[268] - Business operations in the UK expose the company to additional costs and risks, including regulatory complexities, adverse tax consequences, trade restrictions, and currency exchange rate fluctuations[269] - Inability to obtain or maintain sufficient insurance (product liability, clinical trial liability, cybersecurity) on commercially reasonable terms could have a material adverse effect on the business[270][271] RISKS RELATED TO PROTECTING OUR INTELLECTUAL PROPERTY This section addresses risks concerning patent protection, trade secrets, infringement claims, and global intellectual property enforcement - Failure to obtain and maintain sufficient intellectual property protection for imetelstat (patents, trade secrets) could allow competitors to commercialize similar products, adversely affecting the company's ability to commercialize imetelstat[281][282][284] - Compliance with patent agency requirements is crucial; noncompliance or geopolitical events (e.g., Ukraine-Russia conflict) could lead to abandonment or lapse of patent rights[285] - Patent terms may be inadequate to protect imetelstat for a sufficient duration, especially if regulatory approval occurs late or patent term extensions are not granted or are limited[286][288][289] - Changes in U.S. or international patent law (e.g., AIA, EU Patent Package) or interpretations could diminish patent value and enforcement ability[291][292][294] - Challenges to patent rights through administrative or judicial proceedings (e.g., IPRs, oppositions) are costly, time-consuming, and could result in loss of rights or limitations on imetelstat development[295][297][298][299] - Protecting intellectual property globally is expensive and challenging, as patent laws vary, and enforcement may be weaker in some countries, allowing competitors to use technologies or export infringing products[300][301] - The company may face infringement claims from third parties, which are costly to defend and could limit its ability to develop or commercialize imetelstat, or require obtaining expensive licenses[303][304][306] - Failure to secure registered trademarks for imetelstat's commercial trade name, or objections from regulatory bodies (FDA, EMA), could adversely affect the business[308] - Disputes over intellectual property inventorship, ownership, or use with collaborators, or unauthorized publications, could impair patent protection or trade secrets[309] - Much critical information is not patentable, and reliance on trade secrets carries risks of breach or independent discovery by competitors[310] RISKS RELATED TO COMPETITIVE FACTORS This section outlines competitive pressures, market acceptance, reimbursement challenges, and healthcare regulatory compliance risks - Intense competition from pharmaceutical and biotechnology companies, academic institutions, and other research organizations could lead to superior or more cost-effective products than imetelstat, impacting its commercial viability[313][320][322] - If approved for lower risk MDS, imetelstat would compete with existing therapies (ESAs, immunomodulators, HMAs, TGF-beta inhibitors) and other agents in Phase 1/2/3 development[314][315][316][317] - If approved for MF, imetelstat would compete with approved JAK inhibitors (Jakafi, Inrebic, Vonjo) and other therapies in Phase 3 development or under investigation[318][319] - Commercial success of imetelstat depends on market acceptance by the healthcare community, which can be slow to adopt new technologies, and its ability to demonstrate superiority or cost-effectiveness over existing/new therapies[323][324] - Obtaining acceptable prices and adequate reimbursement from third-party payors is critical for commercialization. Government and private payors are increasingly controlling healthcare costs, potentially limiting coverage or reimbursement levels for imetelstat[325][326][327][328] - Health policy changes and healthcare reform in the U.S. (e.g., CARES Act, Biden administration initiatives) could adversely affect drug pricing and reimbursement, impacting the company's business and financial results[329][330][331][333] - Failure to comply with federal, state, and international healthcare laws (fraud and abuse, transparency, privacy, security) could lead to substantial penalties, investigations, and adverse effects on business operations[334][335] - Misconduct by employees, contractors, or clinical trial personnel (e.g., fraudulent data, noncompliance with regulations) could result in regulatory sanctions, reputational harm, and significant financial penalties[336][337] RISKS RELATED TO OUR COMMON STOCK AND FINANCIAL REPORTING This section details risks associated with stock price volatility, Nasdaq listing, dilution, and corporate governance provisions - The company's stock price has historically been extremely volatile, influenced by clinical trial announcements, funding needs, regulatory approvals, market conditions, and litigation[339][340][342] - Failure to meet Nasdaq listing standards (e.g., minimum bid price of $1.00) could lead to delisting, adversely affecting stock liquidity and market price[343] - Future sales or issuance of a substantial number of common stock shares (including from public offerings, warrants, or equity plans) could cause immediate dilution and adversely affect the market price[344][345] - Undesignated preferred stock and provisions in charter/bylaws may inhibit potential acquisition bids, potentially preventing stockholders from benefiting from takeovers[346][347][348] - The company's bylaws designate the Delaware Court of Chancery as the exclusive forum for certain stockholder actions, potentially limiting stockholders' choice of judicial forum[349] - The company does not intend to pay cash dividends on common stock in the foreseeable future, making capital appreciation the sole source of gain for stockholders[350] RISKS RELATED TO INFORMATION TECHNOLOGY SYSTEMS, DATA SECURITY AND DATA PRIVACY This section covers risks related to cybersecurity, data breaches, and compliance with evolving data privacy regulations - Compromise of information technology systems or data (including sensitive information like clinical trial data, intellectual property, personal data) could lead to regulatory investigations, litigation, fines, business disruptions, and reputational harm[352][355][356] - The company relies on third-party service providers for IT systems, and their safeguards may be inadequate, increasing vulnerability to evolving cyber threats (e.g., ransomware, supply-chain attacks)[354][355] - The company is subject to stringent and changing data privacy and security obligations (e.g., EU GDPR, CCPA, CPRA), with non-compliance potentially leading to significant penalties, operational disruptions, and increased costs[358][359][361][363] - Cross-border personal data transfer laws (e.g., EU/UK restrictions) create challenges and potential for increased regulatory actions and fines if valid compliance mechanisms cannot be maintained[361] GENERAL RISK FACTORS This section addresses broad risks including business disruptions, tax law changes, and internal control effectiveness - Business disruptions from natural disasters, pandemics (COVID-19), geopolitical events (Ukraine-Russia conflict), or other man-made disasters could seriously harm operations, increase costs, and affect the ability to develop/commercialize imetelstat[365][366][367] - Changes in tax laws or regulations (e.g., Tax Act, CARES Act) or adverse interpretations could materially affect the company's business, cash flow, and financial results[368] - Failure to achieve and maintain effective internal controls in accordance with Section 404 of Sarbanes-Oxley Act could lead to misstatements, restatements, stock price decline, or other adverse effects[369][370] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section confirms no unregistered equity sales or use of proceeds were reported for the period - None[371] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section indicates that there were no defaults upon senior securities during the reporting period - None[372] ITEM 4. MINE SAFETY DISCLOSURES This section states that mine safety disclosures are not applicable to the company's operations - Not applicable[373] ITEM 5. OTHER INFORMATION This section confirms there is no additional information to report for the period - None[374] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including warrants, compensation policies, and certifications Key Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 4.1 | Form of Pre-Funded Warrant to Purchase Common Stock | | 4.2 | Form of Warrant to Purchase Common Stock | | 10.1 | 2018 Inducement Award Plan, as amended February 16, 2022* | | 10.2 | Non-Employee Director Compensation Policy, as amended February 16, 2022 and March 7, 2022* | | 10.3 | Amended and Restated Severance Plan, effective as of January 1, 2022* | | 31.1+ | Certification of Chief Executive Officer pursuant to Form of Rule 13a-14(a) | | 31.2+ | Certification of Chief Financial Officer pursuant to Form of Rule 13a-14(a) | | 32.1+ | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 ** | | 32.2+ | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 ** | | 101 | iXBRL Financial Statements | | 104 | Inline XBRL Cover Page | SIGNATURES This section confirms the official signing of the report by the Chief Financial Officer - The report was signed on May 9, 2022, by Olivia K. Bloom, Executive Vice President, Finance, Chief Financial Officer, and Treasurer[382]