In a way, John “Chip” Scarlett’s job since he became CEO of Geron last year has been to resist the allure of science.
Starting in the 1990’s, Geron (NASDAQ: GERN) had nurtured seminal work on human embryonic stem cells. When Scarlett took over in September 2011, the Menlo Park company had begun the world’s first clinical trial of a therapy based on those cells. But in an era of tight funding, the new CEO foresaw a lengthy and uncertain path to revenues. Less than two months after Scarlett took the helm, the company announced that it was discontinuing the stem cell program to focus on its two cancer drug candidates.
Scarlett says he doesn’t regret that decision, in spite of a recent flurry of data that eliminated one of Geron’s experimental oncology drugs, GRN1005, and may have narrowed the prospects of the remaining one, imetelstat. As Scarlett sees it, the imetelstat data helped to pinpoint the cancer types where the compound is most likely to succeed.
“I’m very pleased with the decision we made,’’ Scarlett says. “I think we have a potentially promising future with imetelstat.”
Imetelstat is the product of Geron’s longstanding look at those intriguing tag-ends of chromosomes called telomeres, which have been linked to cell longevity, aging and cancer. But it was the stem cell program that had made Geron a very well known, if not profitable company.
Scarlett wasn’t immune to the appeal of Geron’s stem cell work, which he calls “some of the most intriguing science I’ve seen in my 30-plus year career.” Geron coaxed versatile embryonic stem cells to develop into more specialized cells, such as those found in the heart and nervous system. In the hope that these cells could replace injured or diseased tissues, the company launched its first clinical trial in subjects with spinal cord injuries.
But development of that cutting edge treatment would have been expensive and risky—an opinion the CEO still holds.
“We ran a great risk of running out of money and having nothing,” Scarlett says. Geron, after spending many years on innovative science since its founding in 1990, needed to focus on returns to shareholders, the CEO says.
As drug development options in 2011, the company’s two cancer drug candidates held an important advantage over Geron’s experimental stem cell therapies. Whether the anti-cancer compounds failed or succeeded, Geron would know it more quickly, Scarlett contended. Trial data was expected in late 2012 and early 2013.
As it turned out, word came a bit early. It would redefine Geron’s focus again.
On September 10, Geron announced disappointing results for imetelstat in two Phase II trials. The company said it was halting the Phase II trial of the drug in breast cancer, and was not likely to move forward with a Phase III trial in lung cancer. Although other trials of imetelstat were ongoing, Geron’s shares dropped by nearly 56 percent to $1.28.
Then on Dec. 3, Geron reported early data on its second cancer drug candidate, GRN 1005, which was designed to help anti-cancer drugs penetrate the blood-brain barrier so they could attack tumor cells in the brain. Geron said it was discontinuing all work on the compound because trial subjects showed no intracranial responses in an interim analysis.
Scarlett says he appreciated the clever design of GRN 1005. The decision to scrap it was carefully considered. But the quick action meant the company didn’t “spend good money after bad,” he says.
The double dose of bad news was followed by more upbeat signs on Dec. 10, when interim trial data suggested that imetelstat might be an effective treatment in a family of blood diseases called hematological malignancies.
The drug was tested in subjects who had resisted other treatments for a blood disorder called essential thrombocythemia.
The first 14 subjects enrolled in the Phase II trial all responded with a drop in their abnormally high blood platelet counts. In 13 of those subjects, the platelet counts returned to normal levels, Scarlett says. The trial results also raised the possibility that imetelstat selectively attacks tumor cells that give rise to abnormal cells circulating in the blood.
Geron has now restructured its operations to focus on imetelstat. The company’s workforce, which numbered 175 before the stem cell program was halted, has been reduced to 64 employees.
Scarlett says Geron remains committed to move ahead with a tentative agreement to sell its stem cell assets to BioTime Acquisition Corporation (BAC), whose CEO, Thomas Okarma, is a former Geron chief executive. BAC is a subsidiary of the Alameda regenerative medicine company BioTime, whose CEO is Geron’s founder and former CEO, Dr. Michael West. The sale isn’t likely to produce cash to help fund Geron’s oncology program, however. Under a proposed agreement, Geron’s shareholders would receive shares of BAC, which was set up to acquire licenses and other stem cell assets.
Scarlett says Geron has the financial resources to regroup and explore imetelstat’s potential. He expects the company will end this year with a cash balance of $90 million. The burn rate of about $65 million in 2012 will be reduced to about $33 million in 2013, he says.
Geron’s fate now rests on the science of telomeres—those tail ends of chromosomes that control how many times a cell can divide before it dies. The telomeres are a bit like a commuter’s book of train tickets—they get smaller every time the cell divides. When the “tickets” are used up, most cells in the body stop dividing and die.
But in stem cells, like those that continuously give rise to new blood cells, there’s a way to add new tickets. An enzyme called telomerase tacks extensions onto the telomeres, so the stem cells can keep dividing indefinitely.
Unfortunately, some cancer cells can activate telomerase, which maintains their ability to divide, proliferate, and form tumors. Geron designed imetelstat to block telomerase from extending the telomeres—and the lives—of cancer cells.
Scarlett says imetelstat may work best in tumor cells that have short telomeres—perhaps because the enzyme telomerase can’t keep adding extensions fast enough to keep up with the rapid cell divisions of a fast-growing cancer. Most of the blood diseases called hematological malignancies have tumor cells with short telomeres, he says.
In 2013, Geron will probably begin a company-sponsored trial in one of those blood disorders, Scarlett says. The disease called myelofibrosis is a strong possibility, because a Mayo Clinic doctor has already begun an investigator-sponsored trial in that indication. Results from that study could guide the design of Geron’s trial, Scarlett says.
Geron hasn’t abandoned the idea of using imetelstat against solid tumors such as lung cancer. Although the Phase II trial of the drug in non-small cell lung cancer was disappointing when the effect on all trial subjects was considered, a subset of the participants did seem to benefit from the drug, according to Geron’s report on the study. Those subjects had tumor cells with short telomeres.
Scarlett says telomere lengths vary in lung tumors. The company is now refining a test for telomere length that could be used to select trial participants who would be likely to benefit from imetelstat.
Geron is studying its trial data and coordinating with regulators before deciding which trials to start in 2013, Scarlett says.
In a research note, JP Morgan analyst Cory Kasimov said Geron needs to show stronger evidence of imetelstat’s potential in cancer, beyond the positive signs in the company’s small early stage trial in essential thrombocythemia.
“Overall, we believe that GERN will need to replenish its pipeline and will likely stay off investors’ radars absent some compelling proof-of-concept,” Kasimov wrote.
Scarlett says Geron will look first to its own research platform for new pipeline candidates. Imetelstat was the first product of Geron’s proprietary process to create therapeutic oligonucleotides, compounds that can bind to cell molecules such as RNA that are involved in cell division and gene expression. The company has not yet announced the scope of that research platform or its disease targets, the CEO says.
“That’s the best use of our cash by far,” Scarlett says.