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United States
Securities and Exchange Commission
Washington D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended June 30, 1997
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _________ to
__________.
Commission File Number: 0-20859
GERON CORPORATION
Delaware 75-2287752
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
230 Constitution Drive, Menlo Park, CA 94025
(Address of principal executive offices)
Registrant's telephone number, including area code: (650) 473-7700
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class: Common Stock $0.001 par value Outstanding at August 6, 1997:
10,667,858
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GERON CORPORATION
INDEX
<TABLE>
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed Balance Sheets as of June 30, 1997 and December 31, 1996
Condensed Statements of Operations for the three and six months ended
June 30, 1997 and 1996
Condensed Statements of Cash Flows for the six months ended
June 30, 1997 and 1996
Notes to Financial Statements
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Item 2: Changes In Securities
Item 3: Defaults upon Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
</TABLE>
SIGNATURES
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GERON CORPORATION
CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,379 $ 12,357
Short-term investments 16,113 11,912
Other current assets 1,042 752
--------- ---------
Total current assets 27,534 25,021
Property and equipment, net 2,753 2,968
Notes receivable from officers 546 624
Deposits and other assets 172 175
--------- ---------
$ 31,005 $ 28,788
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 592 $ 794
Accrued compensation 399 790
Accrued liabilities 604 790
Deferred revenue 2,925 --
Current portion of capital lease obligations and equipment loans 1,123 1,179
--------- ---------
Total current liabilities 5,643 3,553
Noncurrent portion of capital lease obligations and equipment loans 1,394 1,644
Stockholders' equity:
Common stock 11 10
Additional paid-in-capital 67,579 61,174
Notes receivable from stockholders (83) (119)
Deferred compensation (859) (1,003)
Accumulated deficit (42,680) (36,471)
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Total stockholders' equity 23,968 23,591
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$ 31,005 $ 28,788
========= =========
</TABLE>
See accompanying notes.
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GERON CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues from collaborative agreements
with related parties $ 2,225 $ 1,527 $ 2,225 $ 2,862
License fees & royalties 21 50 49 50
------------ ------------ ------------ ------------
Total revenues 2,246 1,577 2,274 2,912
Operating expenses:
Research and development 3,650 3,411 7,585 6,705
General and administrative 817 856 1,582 1,537
------------ ------------ ------------ ------------
Total operating expenses 4,467 4,267 9,167 8,242
------------ ------------ ------------ ------------
Loss from operations (2,221) (2,690) (6,893) (5,330)
Interest and other income 561 327 884 633
Interest and other expense (103) (96) (202) (197)
------------ ------------ ------------ ------------
Net loss $ (1,763) $ (2,459) $ (6,211) $ (4,894)
============ ============ ============ ============
Net loss per share: $ (0.17) $ (1.47) $ (0.60) $ (2.97)
============ ============ ============ ============
Shares used in calculation of
net loss per share: 10,536,371 1,675,147 10,357,321 1,646,230
</TABLE>
See accompanying notes.
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GERON CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
DECREASE IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,211) $ (4,894)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 629 448
Issuance of common and preferred stock in exchange
for services rendered 73 22
Deferred compensation 144 144
Changes in assets and liabilities:
Other current assets (290) (155)
Notes receivable from officers 78 130
Deposits and other assets 3 5
Accounts payable (202) (136)
Accrued compensation (391) (71)
Accrued liabilities (104) 192
Deferred revenue 2,925 1,038
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Net cash used in operating activities (3,346) (3,277)
Cash flows from investing activities:
Capital expenditures (414) (146)
Purchases of securities available-for-sale (14,188) (11,627)
Proceeds from maturities of securities available-for-sale 9,989 3,500
--------- ---------
Net cash used in investing activities (4,613) (8,273)
Cash flows from financing activities:
Proceeds from equipment loans 263 138
Payments of obligations under capital leases and equipment loans (569) (470)
Proceeds from issuance of common and preferred stock 6,287 3,010
--------- ---------
Net cash provided by financing activities 5,981 2,678
--------- ---------
Net decrease in cash and cash equivalents (1,978) (8,872)
Cash and cash equivalents at the beginning of the period 12,357 12,542
--------- ---------
Cash and cash equivalents at the end of the period $ 10,379 $ 3,670
========= =========
</TABLE>
See accompanying notes.
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GERON CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed unaudited balance sheet as of June 30, 1997 and
condensed statements of operations for the three and six month periods
ended June 30, 1997 and 1996 of Geron Corporation ("Geron" or "the
Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1997. These financial statements should be
read in conjunction with the financial statements for the year ended
December 31, 1996, included in the Company's Annual Report on Form 10-K.
Unless otherwise indicated, all information herein has been restated to
reflect the Company's 1-for-3.4 reverse stock split effected in July 1996
and the conversion of all outstanding Preferred Stock into Common Stock as
of the closing of the Company's initial public offering in August 1996.
Net Loss Per Share
Except as noted below, net loss per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent
shares from stock options and warrants are excluded from the computation as
their effect is antidilutive, except that, pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins, common and common
equivalent shares issued at prices substantially below the public offering
price during the 12-month period prior to the initial filing of the initial
public offering have been included in the calculation as if they were
outstanding for all periods through July 30, 1996 (using the treasury stock
method and the initial public offering price of $8.00 per share).
The effect of common shares issued upon conversion of preferred stock is
included in the loss per share calculation for all periods subsequent to
the date of conversion. The following supplemental per share data is
provided to show the calculation on a consistent basis for all periods
presented. It has been computed as described above, including the
retroactive effect from the date of issuance to the conversion of
convertible preferred stock which automatically converted to common shares
upon closing of the Company's initial public offering.
Supplemental Net Loss Per Share Information
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Supplemental net loss per share $ (0.17) $ (0.34) $ (0.60) $ (0.68)
Shares used in computing
supplemental net loss per share 10,536,371 7,315,047 10,357,321 7,237,339
</TABLE>
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2. CHANGE IN METHOD OF ACCOUNTING FOR EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating earnings per share, the
dilutive effect of stock options will be excluded. There is expected to be
no impact on the net loss per share of the Company for the quarters ended
June 30, 1997 and 1996 as common equivalent shares from stock options are
already excluded from the Company's calculation as their effect is
antidilutive.
3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
Company places its cash and cash equivalents in interest-bearing money
market funds, commercial paper, corporate master notes, and repurchase
agreements with United States financial institutions. As of June 30, 1997,
the Company's short-term investments consisted primarily of corporate notes
with maturities ranging from 3 to 12 months.
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GERON CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains certain forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in these forward-looking statements as a
result of certain factors set forth under the heading "Risk Factors" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and in the section of this Item 2 titled "Additional Factors That May Affect
Future Results."
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I, Item 1 of this
Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
Geron is a biopharmaceutical company exclusively focused on discovering and
developing therapeutic and diagnostic products based upon the common biological
mechanisms underlying cancer and other age-related diseases.
The Company's results of operations have fluctuated from period to period and
may continue to fluctuate in the future based upon the timing and composition of
funding under various collaborative agreements, as well as the progress of its
research and development efforts. 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. Geron is
subject to risks common to companies in its industry and at its stage of
development, including risks inherent in its research and development efforts,
reliance upon collaborative partners, enforcement of patent and proprietary
rights, need for future capital, potential competition and uncertainty of
regulatory approvals or clearances. In order for a product to be commercialized
based on the Company's research, it will be necessary for Geron and its
collaborators to conduct preclinical tests and clinical trials, demonstrate
efficacy and safety of the Company's product candidates, obtain regulatory
approvals or clearances and enter into manufacturing, distribution and marketing
arrangements, as well as obtain market acceptance. The Company does not expect
to receive revenues or royalties based on therapeutic products for a period of
years. See "Additional Factors That May Affect Future Results."
RESULTS OF OPERATIONS
REVENUES
Contract revenues from collaborative agreements with related parties were $2.2
million for the three and six months ended June 30, 1997, respectively, compared
to $1.5 million and $2.9 million for the comparable periods in 1996. The Company
recognizes revenue as related research and development costs are incurred under
the collaborative agreements. The contract revenues in 1996 were solely research
support payments under the Company's collaborative agreement with Kyowa Hakko
and all of the funding received from Kyowa Hakko in 1996 was recognized as
contract revenue during 1996. The Company signed a collaborative agreement with
Pharmacia & Upjohn in March 1997. In April 1997, the Company received research
funding of $1.25 million from Pharmacia & Upjohn and $4.0 million from Kyowa
Hakko.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were $3.7 million and $7.6 million for the
three and six months ended June 30, 1997, respectively, compared to $3.4 million
and $6.7 million for the comparable periods in 1996. The increases were
primarily due to increases in scientific staffing, expanded patent related
activities, amortization of deferred compensation and greater purchases of
research materials and laboratory supplies
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for the expansion of the Company's research programs. The Company expects
research and development expenses to increase in the future as a result of
continued development of its research programs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $817,000 and $1.6 million for the three
and six months ended June 30, 1997, respectively, compared to $856,000 and $1.5
million for the comparable periods in 1996. The overall increase in expenses for
the six month period was primarily due to the amortization of deferred
compensation, higher legal, travel, and other expenses related to business
development and other costs of being a public company.
INTEREST AND OTHER INCOME
Interest income was $355,000 and $673,000 for the three and six months ended
June 30, 1997, respectively, compared to $205,000 and $405,000 for the
comparable periods in 1996. The increase was due to higher average cash and
investment balances as a result of the sale of equity to Pharmacia & Upjohn,
completion of the Company's initial public offering and research funding
received under collaborative agreements with Kyowa Hakko and Pharmacia & Upjohn.
Interest earned in the future will depend on the Company's funding cycles and
prevailing interest rates. The Company also received $206,000 and $211,000 in
research payments under government grants for the three and six months ended
June 30, 1997, respectively, compared to $122,000 and $228,000 for the
comparable periods in 1996. The Company does not expect income from government
grants to be significant in the foreseeable future.
INTEREST AND OTHER EXPENSE
Interest and other expenses were $103,000 and $202,000 for the three and six
months ended June 30, 1997, respectively, compared to $96,000 and $197,000 for
the comparable periods in 1996. The increase was due to higher outstanding lease
obligations during the quarter.
NET LOSS
Net loss was $1.8 million and $6.2 million for the three and six months ended
June 30, 1997, respectively, compared to $2.5 million and $4.9 million for the
comparable periods in 1996. The decrease in net loss for the quarter was a
result of greater revenue recognition in the current quarter from increased
research support payments from collaborative agreements which more than offset
an increase in operating expenses. The increase for the six month period was
primarily the result of the recognition of all the Kyowa Hakko contract revenue
in 1996.
LIQUIDITY AND CAPITAL RESOURCES
On April 25, 1997, in connection with a License and Collaboration Agreement,
Pharmacia & Upjohn purchased $4.0 million of Geron Common Stock at a premium.
Cash, cash equivalents and short-term investments at June 30, 1997 were $26.5
million compared to $14.8 million at June 30, 1996. The increase in cash, cash
equivalents and short-term investments for 1997 was primarily due to the
completion of the Company's initial public offering in August 1996 and the sale
of equity to Pharmacia & Upjohn. It is the Company's investment policy to invest
these funds in liquid, investment-grade securities, such as interest-bearing
money market funds, corporate master notes, commercial paper, repurchase
agreements with United States financial institutions and federal agency notes.
Net cash used in operations remained consistent at $3.3 million for the six
months ended June 30, 1997 and 1996. This is due to an increase in deferred
revenue which offset the increase in net loss for the six months ended June 30,
1997. Deferred revenue increased as a result of additional research funding
received from Pharmacia & Upjohn during the second quarter of 1997.
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For the six months ended June 30, 1997, additions of equipment and leasehold
improvements totaled approximately $414,000 of which approximately $263,000 was
financed through equipment financing arrangements. At June 30, 1997, the Company
was in the process of negotiating a new commitment for $1.0 million in equipment
financing.
The Company estimates that its existing capital resources, payments under the
Pharmacia & Upjohn and Kyowa Hakko Agreements, interest income, grant funding
and equipment financing will be sufficient to fund its current and planned
operations through 1998. There can be no assurance, however, that changes in the
Company's research and development plans or other changes affecting the
Company's operating expenses will not result in the expenditure of available
resources before such time, and in any event, the Company will need to raise
substantial additional capital to fund its operations in future periods. The
Company intends to seek additional funding through collaborative arrangements,
public or private equity financings, capital lease transactions or other
financing sources that may be available.
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ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Specifically, the Company
wishes to alert readers that, except for the historical information contained
herein, the matters discussed in this report constitute forward-looking
statements that are dependent on certain risks and uncertainties. These and
other factors that may cause actual results to differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company
are described below.
TECHNOLOGICAL UNCERTAINTY
The study of the mechanisms of cellular aging and cellular immortality,
including telomere biology and telomerase, is a relatively new area of research,
and there can be no assurance that this research will lead to the discovery or
development of any therapeutic or diagnostic product. If and when potential lead
drug compounds or product candidates are identified through the Company's
research programs, they will require significant preclinical and clinical
testing prior to regulatory approval in the United States and elsewhere, and
there can be no assurance that any of these efforts will result in a product
that can be marketed. Because of the significant additional scientific,
regulatory and commercial milestones that must be reached for the Company's
research programs to be successful, there can be no assurance that any program
will not be abandoned after significant resources have been expended. The
abandonment of any research program could have a material adverse effect on the
Company.
As a result of its drug discovery efforts to date, the Company has identified
compounds in in vitro studies that demonstrate potential for inhibiting
telomerase in vivo. However, additional development efforts will be required
prior to the selection of a lead compound for preclinical development and
clinical trials as a telomerase inhibitor for cancer. If and when selected, a
lead compound may prove to have undesirable and unintended side effects or other
characteristics affecting its efficacy or safety that may prevent or limit its
commercial use. For example, telomerase is active in reproductive cells and
transiently expressed in certain hematopoietic (blood), skin, gastrointestinal
and other cells. There can be no assurance that any product based on the
inhibition of telomerase will not adversely affect such cells and result in
unacceptable side effects. In addition, it is expected that telomerase
inhibition will have delayed efficacy as telomeres resume normal shortening and,
as a result, will in most cases, be used in conjunction with traditional cancer
therapies. There can be no assurance that the delayed efficacy of a telomerase
inhibitor will not have a material adverse effect on the preclinical and
clinical development, ability to obtain regulatory approval or marketability of
a telomerase inhibitor for the treatment of cancer. The abandonment of the
Telomerase Inhibition and Detection program would have a material adverse effect
on the Company.
With respect to the development and commercial application of the Company's
proprietary telomerase detection technology, there is, as yet, insufficient
clinical data to confirm its full utility to diagnose, prognose, monitor or
screen for cancer. Although the Company's licensees, Oncor, Boehringer Mannheim
and Kyowa Medex have commenced the sale of diagnostic kits for research use,
additional development work and regulatory consents will be necessary prior to
the introduction of tests for clinical use. With respect to the Company's
Genomics of Aging program, the Company has identified certain genes that are
expressed differentially in senescent cells versus replicatively young cells.
However, the Company has not identified any lead compounds that have been
demonstrated to modulate such gene expression, and there can be no assurance
that any such lead compound will be discovered or developed. The part of the
Company's Genomics of Aging program that is designed to modulate telomere length
is at an early stage of development. While telomere length and replicative
capacity have been extended in vitro, there can be no assurance that the Company
will discover a compound that will modulate telomere length or increase
replicative capacity effectively for clinical use. The Company's Primordial Stem
Cell program is also at an early stage. While primate Primordial Stem ("PS")
cells have been isolated and allowed to differentiate into numerous cell types,
there can be no assurance that the Company's efforts in this program will result
in any commercial applications.
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The Company may become aware of technology controlled by third parties that is
advantageous to the Company's programs. There can be no assurance that the
Company will be able to acquire or license such technology on reasonable terms,
if at all. In the event that the Company is unable to acquire such technology,
the Company may be required to expend significant time and resources to develop
similar technology, and there can be no assurance that it will be successful in
this regard. If the Company cannot acquire or develop necessary technology, it
may be prevented from pursuing certain business objectives. Moreover, a
competitor of the Company could acquire or license such technology. Any such
event could have a material adverse effect on the Company.
EARLY STAGE OF DEVELOPMENT
Geron is at an early stage in the development of therapeutic and diagnostic
products. The Company has not yet selected a lead compound for any of its drug
development programs. In order to identify and select such a compound, it must
have access to sufficient numbers of chemical compounds and resources, of which
there can be no assurance. Products that may result from the Company's research
and development programs are not expected to be commercially available for a
number of years, if at all. The Company's program to identify a telomerase
inhibitor is currently at the drug discovery stage, while the Company's other
programs are currently focused on research efforts prior to drug discovery or
preclinical development. It is difficult to predict when, if ever, the Company
will select a lead compound for drug development as a telomerase inhibitor. In
addition, there can be no assurance that the Company's other programs will move
beyond their current stage. Assuming the Company's research advances and the
Company is able to identify and select a lead compound for telomerase
inhibition, certain preclinical development efforts will be necessary to
determine whether the potential product has sufficient safety to enter clinical
trials. If such a potential product receives authorization from the United
States Food and Drug Administration ("FDA") to enter clinical trials, then it
will most likely be subjected to a multiphase, multicenter clinical study to
determine its safety and efficacy. It is not possible to predict the length or
extent of clinical trials or the period of any required patient follow-up.
Assuming clinical trials of any potential product are successful and other data
are satisfactory, the Company will submit an application to the FDA and
appropriate regulatory bodies in other countries to seek permission to market
the product. The review process at the FDA can take several years, and there can
be no assurance that the FDA will approve the Company's application or will not
require additional clinical trials or other data prior to approval. Furthermore,
even if such approval is ultimately obtained, delays in the approval process
could have a material adverse effect on the Company. In addition, there can be
no assurance that any potential product will be capable of being produced in
commercial quantities at a reasonable cost or that such product will be
successfully marketed. Based on the foregoing, the Company does not anticipate
being able to commence marketing of any therapeutic products for a period of
years, if at all. There can be no assurance that any of the Company's product
development efforts will be successfully completed, that regulatory approvals
will be obtained, or that the Company's products, if any, will achieve market
acceptance.
DEPENDENCE ON STRATEGIC AND RESEARCH COLLABORATIONS
The Company's strategy for the development, clinical testing and
commercialization of its products includes entering into collaborations with
corporate partners, licensors, licensees and others, and the Company is
dependent upon the subsequent success of these other parties in performing their
respective responsibilities. The success of any collaboration depends on the
continued cooperation of its partners, as to which there can be no assurance.
The amount and timing of resources to be devoted to activities by its
collaborators are not within the direct control of the Company. There can be no
assurance that such partners will perform their obligations as expected or that
the Company will derive any benefits from such arrangements. There can also be
no assurance that the Company's current collaborators or any future
collaborators will not pursue existing or alternative technologies in preference
to those being developed in collaboration with the Company.
The Company currently has no manufacturing infrastructure and no marketing or
sales organization, and intends to rely in substantial part on its current and
future strategic partners for the manufacture of any product and the principal
marketing and sales responsibilities for any such product. To the extent the
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Company chooses not to or is unable to establish such arrangements, the Company
will require substantially greater capital to undertake its own manufacturing,
marketing and sales of any product.
In April 1995, the Company entered into a License and Research Collaboration
Agreement with Kyowa Hakko (the "Kyowa Hakko Agreement") for the development and
commercialization in certain Asian countries of a telomerase inhibitor for the
treatment of cancer. Under the collaboration, Kyowa Hakko provides certain
funding for the Company's research and development activities and is responsible
for all clinical, regulatory, manufacturing, marketing and sales efforts and
expenses in the covered territory. The Kyowa Hakko Agreement provides that Kyowa
Hakko will not pursue research and development independent of its collaboration
with Geron with respect to telomerase inhibition for the treatment of cancer in
humans until April 7, 2000, at the earliest. The Kyowa Hakko Agreement also
provides in general that, while Geron exercises significant influence during the
research phase, Kyowa Hakko exercises significant influence during the
development and commercialization phases of the collaboration. In March 1997,
the Kyowa Hakko Agreement was amended to extend its term until April 2000 and to
make certain other changes in connection with the signing of the Pharmacia &
Upjohn Agreement (as defined below).
On March 23, 1997 the Company signed a License and Research Collaboration
Agreement (the "Pharmacia & Upjohn Agreement") with Pharmacia & Upjohn, S.p.A.
to collaborate in the discovery, development and commercialization of a new
class of anticancer drugs that inhibit telomerase. Under the collaboration,
Pharmacia & Upjohn will provide certain funding of the Company's research and
development activities and will be primarily responsible for all clinical,
regulatory, manufacturing, marketing and sales efforts and expenses. Geron has
certain promotion rights with corresponding clinical expense obligations. As
with the Kyowa Hakko Agreement, the Company exercises significant influence
during the research phase of the collaboration while Pharmacia & Upjohn will
exercise significant influence during the development and commercialization
phases of the collaboration. Through the Pharmacia & Upjohn and Kyowa Hakko
Agreements, the Company has granted to Pharmacia & Upjohn and Kyowa Hakko
exclusive worldwide rights to its telomerase inhibition technology, with
exception to certain antisense and gene therapy technology outside Asia, for the
treatment of cancer in humans. If and when a telomerase inhibitor is selected
for development and commercialization under the Agreements, the Company will be
significantly dependent upon the activities of Pharmacia & Upjohn and Kyowa
Hakko for the successful commercialization of such product. Any failure of
Pharmacia & Upjohn and Kyowa Hakko to develop or commercialize a telomerase
inhibitor (if and when selected) will have a material adverse effect on the
Company.
The Company has also entered into licensing arrangements with several diagnostic
companies for the Company's telomerase detection technology. However, because
these licenses are limited to the research-use-only market, such arrangements
are not expected to generate significant commercial revenues.
There can be no assurance that the Company will be able to negotiate additional
strategic arrangements in the future on acceptable terms, if at all, or that
such strategic arrangements will be successful. In the absence of such
arrangements, the Company may encounter significant delays in introducing any
product or find that the research, development, manufacture, marketing or sale
of any product is adversely affected. In the event that the Company does not
enter into such arrangements, it may be materially adversely affected.
The Company has relationships with collaborators and scientific advisors at
academic and other institutions, some of whom conduct research at the Company's
request. These collaborators and scientific advisors are not employees of the
Company and may have commitments to, or consulting or advisory contracts with,
other entities that may limit their availability to the Company. The Company has
limited control over the activities of these collaborators and advisors and,
except as otherwise required by its collaboration and consulting agreements, can
expect only limited amounts of their time to be dedicated to the Company's
activities.
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DEPENDENCE ON PROPRIETARY TECHNOLOGY AND UNCERTAINTY OF PATENT PROTECTION
Protection of the Company's proprietary compounds and technology is important to
the Company's business. The Company owns five (5) issued United States patents
and over 40 United States patent applications and has licensed 13 issued United
States patents and over 40 United States patent applications, as well as
international filings under the Patent Cooperation Treaty and pending foreign
national patent applications corresponding to certain of these United States
applications. Geron's success will depend in part on its ability to obtain and
enforce its patents and maintain trade secrets, both in the United States and in
other countries. The patent positions of pharmaceutical and biopharmaceutical
companies, including the Company, are highly uncertain and involve complex legal
and technical questions for which legal principles are not firmly established.
There can be no assurance that the Company has developed or will continue to
develop products or processes that are patentable or that patents will issue
from any of the pending applications, including even allowed patent
applications. There can also be no assurance that the Company's current patents,
or patents that issue on pending applications, will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
proprietary protection or competitive advantages to the Company. Because (i)
patent applications in the United States are maintained in secrecy until patents
issue, (ii) patent applications are not generally published until many months or
years after they are filed and (iii) publication of technological developments
in the scientific and patent literature often occurs long after the date of such
developments, the Company cannot be certain that its or its licensors' patents
and patent applications name as inventors were the first to invent the
inventions disclosed in the patent applications or patents or that it or its
licensors were the first to file patent applications for such inventions.
Litigation to establish the validity of patents, to defend against patent
infringement claims of others and to assert infringement claims against others
can be expensive and time consuming even if the outcome is favorable to the
Company. If the outcome of patent prosecution or litigation is unfavorable to
the Company, the Company could be materially adversely affected.
Patent law relating to the scope and enforceability of claims in the fields in
which the Company operates is still evolving. The degree of future protection
for the Company's proprietary rights, therefore, is highly uncertain. In this
regard, there can be no assurance that independent patents will issue from each
of the United States patent applications referenced above, which include many
interrelated applications directed to common or related subject matter. The
Company is aware of certain patent applications that have been filed by others
with respect to telomerase and telomere length modulation. In addition, there
are a number of issued patents and pending applications owned by others directed
to differential display, stem cell and other technologies relating to the
Company's research, development and commercialization efforts. There can be no
assurance that the Company's technology can be developed and commercialized
without a license to such patents or that such patent applications will not be
granted priority over patent applications filed by the Company or its licensors.
Furthermore, there can be no assurance that others will not independently
develop similar or alternative technologies to those of the Company, duplicate
any of the Company's technologies or design around the patented technologies
developed by the Company or its licensors, any of which may have a material
adverse effect on the Company.
The commercial success of the Company depends significantly on its ability to
operate without infringing patents and proprietary rights of others. There can
be no assurance that the Company's technologies do not and will not infringe the
patents or proprietary rights of others. In the event of such infringement, the
Company may be enjoined from pursuing research, development or commercialization
of its potential products or may be required to obtain licenses to these patents
or other proprietary rights or to develop or obtain alternative technologies.
There can be no assurance that the Company will be able to obtain alternative
technologies or any required license on commercially favorable terms, if at all,
and if any such license is or alternative technologies are not obtained, the
Company may be delayed or prevented from pursuing the development of certain of
its potential products. The Company's breach of an existing license or failure
to obtain or delay in obtaining alternative technologies or a license to any
technology that it may require to develop or commercialize its products may have
a material adverse effect on the Company. In this regard, the Company has been
in discussion with an academic institution with respect to a research
collaboration for the development of certain technology related to its
Primordial Stem Cell program. In
14
<PAGE> 15
July 1996, a third party notified the Company and the academic institution that
if the Company enters into such an arrangement, the Company and the academic
institution will violate the rights of such third party. If the Company enters
into a relationship with the academic institution, the Company would indemnify
the academic institution for any claims brought by the third party against the
academic institution. After a review of the correspondence with the third party,
the Company believes that the third party's claims would fall into three general
categories: patent infringement, misuse of confidential information and breach
of contract. As of the date of this Form 10-Q, the Company is continuing
negotiations with the institution with a view toward entering into licensing and
sponsored research agreements. If such an arrangement is entered into, the
Company believes it and the academic institution have substantial defenses to
any claims that might be asserted by such third party. However, any litigation
resulting from this matter may divert significant resources, both financial and
otherwise, from the Company's research programs and there can be no assurance
that the Company would be successful in any such litigation. If the outcome of
any such litigation is unfavorable to the Company, the Company could be
materially and adversely affected.
Litigation may also be necessary to enforce any patents issued or licensed to
the Company or to determine the scope and validity of anothers' proprietary
rights. The Company could incur substantial costs if litigation is required to
defend itself in patent suits or other intellectual property litigation brought
by others or if Geron initiates such suits. There can be no assurance that the
Company's issued or licensed patents would be held valid or infringed in a court
of competent jurisdiction or that a patent held by another will be held invalid
or not infringed in such court. An adverse outcome in litigation or an
interference to determine priority or other proceeding in a court or patent
office could subject the Company to significant liabilities to other parties,
require disputed rights to be licensed from other parties or require the Company
to cease using such technology, any of which could have a material adverse
effect on the Company.
Geron also relies on trade secrets to protect its proprietary technology,
especially in circumstances in which patent protection is not believed to be
appropriate or obtainable. Geron attempts to protect its proprietary technology
in part by confidentiality agreements with its employees, consultants and
certain contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.
The Company is party to various license agreements which give it rights to use
certain technologies in its research, development and commercialization
activities. Disputes have arisen and may continue to arise as to the
inventorship and corresponding rights in know-how and inventions resulting from
the joint creation or use of intellectual property by the Company and its
licensors, research collaborators and consultants. There can be no assurance
that the Company will be able to continue to license such technologies on
commercially reasonable terms, if at all, or to maintain the exclusivity of its
exclusive licenses. The failure of the Company to maintain exclusive or other
rights to such technologies could have a material adverse effect on the Company.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial capital resources in order to conduct its
operations. The Company's future capital requirements will depend on many
factors, including, among others, continued scientific progress in its research
and development programs; the magnitude and scope of these activities; the
ability of the Company to maintain and establish strategic arrangements for
research, development, clinical testing, manufacturing and marketing; progress
with preclinical and clinical trials; the time and costs involved in obtaining
regulatory approvals; the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims; or the potential for new
technologies and products. The Company intends to seek such additional funding
through strategic collaborations, public or private equity financings and
capital lease transactions; however, there can be no assurance that additional
financing will be available on acceptable terms, if at all. Additional equity
financings could result in significant dilution to stockholders. Further, in the
event that additional funds are obtained through arrangements with collaborative
partners, such arrangements may require the Company to relinquish rights to
certain of its technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself. If sufficient capital
is not available, the Company may be required to delay, reduce the scope of or
eliminate one or more of its research or development programs, each of which
would have a material adverse effect on the Company. Based on current
projections, the Company estimates that its existing capital resources, payments
under the Pharmacia & Upjohn and Kyowa Hakko Agreements, interest income, grant
funding and equipment financing will be sufficient to fund its current and
planned operations through 1998. There can be no assurance that the assumptions
underlying such estimates are correct or that such funds will be sufficient to
meet the capital needs of the Company during such period.
15
<PAGE> 16
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT
Geron has incurred net operating losses in every year of operation since its
inception in 1990. Losses have resulted principally from costs incurred in
connection with the Company's research and development activities and from
general and administrative costs associated with the Company's operations. The
Company expects to incur additional operating losses over the next several years
as the Company's research and development efforts and preclinical testing are
expanded. Substantially all of the Company's revenues to date have been research
support payments under the collaborative agreements with Kyowa Hakko and
Pharmacia & Upjohn. Research support payments under the Kyowa Hakko Agreement
expire in April 1998. Research payments under the Pharmacia & Upjohn Agreement
expire in January 2000. In addition, the Company is unable to estimate at this
time the level of revenue to be received from the sale of diagnostic products,
but does not expect to receive significant revenues from the sale of
research-use-only kits. The Company's ability to achieve profitability is
dependent on its ability, alone or with others, to select therapeutic compounds
for development, obtain the required regulatory approvals and manufacture and
market resulting products. There can be no assurance when or if the Company will
receive material revenues from product sales or achieve profitability. Failure
to generate significant additional revenues and achieve profitability could
impair the Company's ability to sustain operations.
SUBSTANTIAL COMPETITION; RISK OF TECHNOLOGICAL OBSOLESCENCE
The pharmaceutical and biopharmaceutical industries are intensely competitive.
The Company believes that certain pharmaceutical and biopharmaceutical companies
as well as certain research organizations currently engage in or have in the
past engaged in efforts related to the biological mechanisms of cell aging and
cell immortality, including the study of telomeres and telomerase. In addition,
other products and therapies that could compete directly with the products that
the Company is seeking to develop and market currently exist or are being
developed by pharmaceutical and biopharmaceutical companies, and by academic and
other research organizations. Many companies are also developing alternative
therapies to treat cancer and, in this regard, are competitive with the Company.
The pharmaceutical companies developing and marketing such competing products
have significantly greater financial resources and expertise in research and
development, manufacturing, preclinical and clinical testing, obtaining
regulatory approvals and marketing than the Company. Smaller companies may also
prove to be significant competitors, particularly through collaborative
arrangements with large and established companies. Academic institutions,
government agencies and other public and private research organizations may also
conduct research, seek patent protection and establish collaborative
arrangements for research, clinical development and marketing of products
similar to those of the Company. These companies and institutions compete with
the Company in recruiting and retaining qualified scientific and management
personnel as well as in acquiring technologies complementary to the Company's
programs. There is also competition for access to libraries of compounds to use
for screening. Any inability of the Company to secure and maintain access to
sufficiently broad libraries of compounds for screening potential targets would
have a material adverse effect on the Company. In addition to the above factors,
Geron will face competition with respect to product efficacy and safety, the
timing and scope of regulatory consents, availability of resources,
reimbursement coverage, price and patent position, including potentially
dominant patent positions of others. There can be no assurance that competitors
will not develop more effective or more affordable products, or achieve earlier
patent protection or product commercialization than the Company or that such
products will not render the Company's products obsolete.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the principal members of its scientific and
management staff, the loss of whose services might significantly delay or
prevent the achievement of research, development or business objectives. In
addition, the Company relies on consultants and advisors, including the members
of its Scientific Advisory Board, to assist the Company in formulating its
research and development strategy. Retaining and attracting qualified scientific
and management personnel, consultants and advisors is critical to the Company's
success. The Company faces competition for qualified individuals from numerous
16
<PAGE> 17
pharmaceutical, biopharmaceutical and biotechnology companies, as well as
academic and other research institutions. There can be no assurance that the
Company will be able to attract and retain such individuals on acceptable terms
and the failure to do so would have a material adverse effect on the Company.
ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF PRIMORDIAL STEM CELL PROGRAM
The Company's Primordial Stem Cell program may involve the use of PS cells that
would be derived from human embryonic tissue, and therefore may raise certain
ethical, legal and social issues regarding the appropriate utilization of this
tissue. The use of embryonic tissue in scientific research is an issue of
national interest. Many research institutions, including certain of the
Company's scientific collaborators, have adopted policies regarding the ethical
use of these types of human tissue. These policies may have the effect of
limiting the scope of research conducted in this area, resulting in reduced
scientific progress. In addition, the United States government and its agencies
currently do not fund research which involves the use of such tissue and may in
the future regulate or otherwise restrict its use. The inability of the Company
to conduct research on these cells due to such factors as government regulation
or otherwise could have a material adverse effect on the program. In the event
the Company's research related to PS cell therapies becomes the subject of
adverse commentary or publicity, the Company's name and goodwill could be
adversely affected.
GOVERNMENT REGULATION
The preclinical testing and clinical trials of any products developed by the
Company or its collaborative partners and the manufacturing, labeling, sale,
distribution, marketing, advertising and promotion of any new products resulting
therefrom are subject to regulation by federal, state and local governmental
authorities in the United States, the principal one of which is the FDA, and by
similar agencies in other countries in which products developed by the Company
or its collaborative partners may be tested and marketed (each of such federal,
state, local and other authorities and agencies is referred to herein as a
"Regulatory Agency"). Any product developed by the Company or its collaborative
partners must receive all relevant Regulatory Agency approvals or clearances, if
any, before it may be marketed in a particular country. The regulatory process,
which includes extensive preclinical testing and clinical trials of each product
in order to establish its safety and efficacy, is uncertain, can take many years
and requires the expenditure of substantial resources. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations
which could delay, limit or prevent Regulatory Agency approval or clearance. In
addition, delays or rejections may be encountered based upon changes in
Regulatory Agency policy during the period of product development and/or the
period of review of any application for Regulatory Agency approval or clearance
for a product. Delays in obtaining Regulatory Agency approvals or clearances
could adversely affect the marketing of any products developed by the Company or
its collaborative partners, impose costly procedures upon the Company's and its
collaborative partners' activities, diminish any competitive advantages that the
Company or its collaborative partners may attain and adversely affect the
Company's ability to receive royalties and generate revenues and profits. There
can be no assurance that, even after such time and expenditures, any required
Regulatory Agency approvals or clearances will be obtained for any products
developed by or in collaboration with the Company. Moreover, if Regulatory
Agency approval or clearance for a new product is obtained, such approval or
clearance may entail limitations on the indicated uses for which it may be
marketed that could limit the potential market for any such product.
Furthermore, approved products and their manufacturers are subject to continual
review, and discovery of previously unknown problems with a product or its
manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market. In general, failure to
comply with FDA requirements can result in severe civil and criminal penalties,
including but not limited to recall or seizure of product, injunction against
manufacture, distribution, sales and marketing and criminal prosecution.
17
<PAGE> 18
NO ASSURANCE OF MARKET ACCEPTANCE; UNCERTAINTY OF PHARMACEUTICAL PRICING; IMPACT
OF HEALTH CARE REFORM MEASURES
There can be no assurance that any products successfully developed by the
Company or its collaborative partners, if approved for marketing, will achieve
market acceptance. The products which the Company is attempting to develop will
compete with a number of traditional drugs and therapies manufactured and
marketed by major pharmaceutical companies, as well as new products currently
under development by such companies and others. The degree of market acceptance
of any products developed by the Company will depend on a number of factors,
including the establishment and demonstration in the medical community of the
clinical efficacy and safety of the Company's product candidates, their
potential advantage over alternative treatment methods and reimbursement
policies of government and third-party payors. There is no assurance that
physicians, patients or the medical community in general will accept and utilize
any products that may be developed by the Company or its collaborative partners.
In both domestic and foreign markets, sales of the Company's products, if any,
will depend in part on the availability of reimbursement from third-party payors
such as government health administration authorities, private health insurers,
health maintenance organizations, pharmacy benefit management companies and
other organizations. Both federal and state governments in the United States and
foreign governments continue to propose and pass legislation designed to contain
or reduce the cost of health care through various means. Legislation and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of the Company's potential products are
approved for marketing. Cost control initiatives could decrease the price that
the Company receives for any product it may develop in the future and have a
material adverse effect on the Company. In addition, third-party payors are
increasingly challenging the price and cost-effectiveness of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products, including pharmaceuticals. There can be no
assurance that the Company's potential products will be considered cost
effective or that adequate third-party reimbursement will be available to enable
Geron to maintain price levels sufficient to realize an appropriate return on
its investment in product development. In any such event, the Company may be
materially adversely affected.
REGULATIONS RELATING TO THE ENVIRONMENT AND HAZARDOUS MATERIALS
The Company's research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive compounds. As a
consequence, the Company is subject to numerous environmental and safety laws
and regulations. There can be no assurance that the Company will not be required
to incur significant costs to comply with current or future environmental laws
and regulations or that the Company will not be adversely affected by the cost
of compliance with such laws and regulations. Although the Company believes that
its safety procedures for using, handling, storing and disposing of such
materials comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
eliminated. In the event of such an accident, the Company's use of these
materials could be curtailed by state or federal authorities, the Company could
be held liable for any damages that result and any such liability could have a
material adverse effect on the Company.
POTENTIAL PRODUCT LIABILITY CLAIMS; ABSENCE OF INSURANCE
Although the Company believes it does not currently have any exposure to product
liability claims, the Company's future business will expose it to potential
product liability risks that are inherent in the testing, manufacturing and
marketing of human therapeutic and diagnostic products. The Company currently
has no clinical trial liability insurance and there can be no assurance that it
will be able to obtain and maintain such insurance for any of its clinical
trials. In addition, there can be no assurance that the Company will be able to
obtain or maintain product liability insurance in the future on acceptable terms
or with adequate coverage against potential liabilities.
18
<PAGE> 19
CONTROL BY MANAGEMENT AND CURRENT STOCKHOLDERS
Executive officers and directors of the Company, together with entities
affiliated with them, own or control approximately 30% of the outstanding shares
of Common Stock and are able to influence significantly the election of the
Company's Board of Directors and other corporate actions requiring stockholder
approval, as well as significantly influence the direction and policies of the
Company.
POTENTIAL ADVERSE MARKET IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Common Stock in the public market could
adversely affect the market price of the Common Stock. The Company has
outstanding approximately 10,660,000 shares of Common Stock as of June 30, 1997.
Pharmacia & Upjohn S.p.A. has agreed not to sell the 441,685 shares held by it
until April 2000, after which time such shares will be freely transferable in
accordance with Regulation S promulgated under the Securities Act of 1933, as
amended ("the Securities Act"). The SEC has adopted amendments to Rule 144 and
Rule 701 of the Securities Act to shorten the holding period required for shares
issued in reliance on exceptions from the Securities Act ("Restricted Shares"),
which amendments became effective on April 29, 1997. As a result of the
amendments, as of April 29, 1997, the Company's outstanding Restricted Shares
will be eligible for sale in the public market subject to Rule 144 and Rule 701
under the Securities Act, except for those shares sold to Pharmacia & Upjohn.
Certain holders of shares of Common Stock and securities convertible into or
exercisable for shares of Common Stock have certain registration rights under a
registration rights agreement among such holders and the Company.
POSSIBLE VOLATILITY OF STOCK PRICE
There has been a history of significant volatility in the market price for
shares of biopharmaceutical companies, and it is likely that the market price of
the Common Stock will be similarly volatile. Prices for the Common Stock may be
influenced by many factors, including the depth of the market for the Common
Stock, investor perception of the Company, fluctuations in the Company's
operating results and market conditions relating to the biopharmaceutical and
pharmaceutical industries. In addition, the market price of the Common Stock may
be influenced by announcements of technological innovations, new commercial
products or clinical progress or the lack thereof by the Company, its
collaborative partners or its competitors. In addition, announcements concerning
regulatory developments, developments with respect to proprietary rights and the
Company's collaborations as well as other factors could also have a significant
impact on the Company's business and the market price of the Common Stock.
Finally, future sales of substantial amounts of Common Stock by existing
stockholders could also adversely affect the prevailing price of the Common
Stock.
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS; CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue up to 3,000,000
shares of undesignated Preferred Stock and to determine the rights, preferences,
privileges and restrictions of such shares without further vote or action by the
Company's stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. In addition,
certain provisions of the Company's charter documents, including the inability
of stockholders to take actions by written consent and the staggered election of
the Company's Board of Directors, and certain provisions of Delaware law could
delay or make difficult a merger, tender offer or proxy contest involving the
Company.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 Annual Meeting of Stockholders of the Company was
held pursuant to notice on May 23, 1997, at 9:00 a.m. local
time at the Company headquarters in Menlo Park, California.
There were present at the meeting, in person or represented by
proxy, the holders of 6,744,056 shares of Common Stock. The
matters voted on at the meeting and the votes cast are as
follows:
(a) As listed below, all of the nominees for Class I
Directors were elected at the meeting:
<TABLE>
<CAPTION>
NO. OF COMMON NO. OF COMMON
NAME OF NOMINEE VOTES IN FAVOR VOTES WITHHELD
------------------ -------------- --------------
<S> <C> <C>
Charles M. Hartman 6,734,056 10,000
John P. Walker 6,734,056 10,000
Michael D. West, Ph.D 6,734,056 10,000
</TABLE>
(b) The approval of an amendment to the
Company's 1992 Stock Option Plan to
increase the aggregate number of
shares of Common Stock authorized
for issuance under such Plan by
800,000 shares. There were 5,056,114
shares of Common Stock voting in
favor, 643,341 shares of Common
Stock voting against, 210,483 shares
of Common Stock abstaining and
834,118 broker non-votes.
(c) The ratification of the appointment
of Ernst & Young LLP as the
Company's independent accountants
for the fiscal year ending December
31, 1997. There were 6,698,919
shares of Common Stock voting in
favor, 2,870 shares of Common Stock
voting against, 10,000 shares of
Common Stock abstaining and 32,267
broker non-votes.
20
<PAGE> 21
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11.1 Computation of Net Loss Per Share
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Reports on Form 8-K were filed
during the quarter ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GERON CORPORATION
By: /s/ David L. Greenwood
-------------------------------
David L. Greenwood
Chief Financial Officer, Treasurer and Secretary
(Duly Authorized Signatory and Principal
Financial and Accounting Officer)
Date: August 11, 1997
21
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
11.1 Computation of Net Loss Per Share
27.1 Financial Data Schedule
</TABLE>
22
<PAGE> 1
EXHIBIT 11.1
GERON CORPORATION
STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE
(UNAUDITED)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net loss $ (1,763) $ (2,459) $ (6,211) $ (4,894)
=========== ========== =========== ==========
Shares used in calculation of net loss per share:
Weighted Average
Common Shares outstanding 10,536,371 951,700 10,357,321 922,783
Shares related to
SAB Nos. 55, 64 and 83 -- 723,447 -- 723,447
----------- ---------- ----------- ----------
Shares used in computing
net loss per share 10,536,371 1,675,147 10,357,321 1,646,230
=========== ========== =========== ==========
Net loss per share $ (0.17) $ (1.47) $ (0.60) $ (2.97)
=========== ========== =========== ==========
Calculation of shares outstanding for computing supplemental
net loss per share:
Shares used in computing net loss per share 10,536,371 951,700 10,357,321 922,783
Adjusted to reflect effect of
assumed conversion of preferred
stock from date of issuance -- 6,363,347 -- 6,314,556
----------- ---------- ----------- ----------
Shares used in computing
supplemental net loss per share 10,536,371 7,315,047 10,357,321 7,237,339
=========== ========== =========== ==========
Supplemental net loss per share $ (0.17) $ (0.34) $ ( 0.60) $ (0.68)
=========== ========== =========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED BALANCE SHEET AS OF JUNE 30, 1997 AND UNAUDITED CONDENSED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED JUNE 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,379
<SECURITIES> 16,113
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,534
<PP&E> 5,846
<DEPRECIATION> 3,093
<TOTAL-ASSETS> 31,005
<CURRENT-LIABILITIES> 5,643
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 23,957
<TOTAL-LIABILITY-AND-EQUITY> 31,005
<SALES> 0
<TOTAL-REVENUES> 2,274
<CGS> 0
<TOTAL-COSTS> 9,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 202
<INCOME-PRETAX> (6,211)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,211)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
