GERON CORP

The increase in research and development expenses for the three months ended March 31, 2020 compared to the same period in 2019 primarily reflects higher direct external costs for clinical development activities to support the development of imetelstat in lower risk MDS, including the Phase 3 portion of IMerge. In addition, personnel-related expenses have increased in the first quarter of 2020 compared to the same period in 2019 as a result of additional development headcount being hired in 2019. Our spending in the first quarter of 2020 reflected normal business activities into March and then a curtailment of certain costs, due to the impact of the COVID-19 pandemic. While direct external expenses are expected to decrease in the second quarter of 2020 as a result of a reduction in clinical trial activities limited by the COVID-19 pandemic, much of our personnel-related expenses will continue in line with the first quarter of 2020, with some decline as a result of travel restrictions. Due to the uncertainties of the COVID-19 pandemic, we cannot predict the level of research and development expenses to be incurred during the remainder of 2020. However, we expect research and development expenses to increase substantially in the future as we support two Phase 3 clinical trials of imetelstat, the ongoing Phase 3 portion of IMerge and the planned Phase 3 clinical trial in refractory MF. At this time, we cannot provide reliable estimates of how much time or investment will be necessary to advance imetelstat toward commercialization. For a more complete discussion of the risks and uncertainties associated with the development of imetelstat, see the sub‑sections entitled “Risks Related to the Development of Imetelstat” and “Risks Related to Regulatory Approval and Commercialization of Imetelstat” in Part II, Item 1A entitled “Risk Factors” and elsewhere in this Form 10‑Q.

Due to the evolving effects of the COVID-19 pandemic, we have had and expect to continue to have, or we may potentially have in the future, disruptions and/or delays in our imetelstat development program, including with respect to our ability to initiate trial sites, screen, enroll and assess patients, maintain patient enrollment, ensure patient clinical and lab collection visits, conduct monitoring visits, supply study drug, report trial results, or interact with regulators or other important agencies due to limitations in employee resources or otherwise. For the Phase 3 portion of IMerge, we have clinical trial sites in many countries that have had high incident rates of COVID-19. Restrictions on travel, availability of site personnel, and diversion of hospital staff and resources to COVID-19 patients, have disrupted our trial operations, as well as patient recruitment in many areas, resulting in a slowdown in patient enrollment and/or deviations from or disruptions in key clinical trial activities, such as clinical trial site initiation and monitoring. As a result, we no longer expect to complete patient enrollment in the Phase 3 portion of IMerge by the end of 2020 and now expect to complete patient enrollment in the Phase 3 portion of IMerge by the end of the first quarter of 2021. Additionally, the effects of the COVID-19 pandemic have resulted in our decision to postpone the commencement of our previously disclosed proof-of-concept study in high risk MDS and AML that we had previously planned to commence in 2020. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our clinical development timelines, continued delays in enrollment and clinical trial site initiation in the Phase 3 portion of IMerge, and other disruptions that could severely impact our business and the imetelstat development program, including those resulting from:

In addition, we rely on third-party CROs or other third parties to assist us with clinical trial activities, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. Also, absenteeism by governmental employees or the focus of regulatory authorities’ efforts and attention on the approval of other therapeutics or other activities related to COVID-19 could likewise impact the timeliness of regulatory authority responses and the processing of regulatory submissions for imetelstat. Moreover, while at this time we believe that we have sufficient drug supply for the Phase 3 portion of IMerge, we could experience disruptions to our supply chain as a result of the evolving effects of the COVID-19 pandemic, and associated delays or limitations in our ability to obtain sufficient materials for the manufacture of imetelstat for our current and potential future clinical trials, which could adversely affect our ability to conduct ongoing and potential future clinical trials of imetelstat. For example, some of our suppliers of certain materials used in the production of imetelstat are located in countries that are heavily affected by the COVID-19 pandemic. In these countries, closures and other restrictions resulting from the COVID-19 outbreak in the region could disrupt our supply chain or limit our ability to obtain sufficient materials for the manufacture of imetelstat, including for the planned Phase 3 clinical trial in refractory MF. In any event, if the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our clinical development timelines, which would materially and adversely affect our business and business prospects, our financial condition and the future of imetelstat.

The effects of the COVID-19 pandemic continue to rapidly evolve. These effects have increased market volatility and could result in a significant long-term disruption of global financial markets, reducing or eliminating our ability to raise additional capital, which could negatively affect our liquidity and our ability to conduct and complete the planned Phase 3 clinical trial in refractory MF or to commence, conduct and complete any other potential future clinical trials of imetelstat. In addition, the global economic slowdown caused by the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock. The extent to which the COVID-19 pandemic impacts our business, our regulatory and clinical development activities, clinical supply chain and other business operations, as well as the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S. and in other countries, and the effectiveness of actions taken globally to contain and treat COVID-19. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our regulatory and clinical development activities, clinical supply chain and other business operations or the global economy as a whole. However, these effects could materially and adversely affect our business and business prospects, our financial condition and the future of imetelstat. In addition, to the extent the evolving effects of the COVID-19 pandemic adversely affect our business and financial condition, it may also have the effect of heightening many of the other risks and uncertainties described elsewhere under the heading “Risk Factors”.

A trial design that is considered appropriate for regulatory approval includes a sufficiently large sample size with appropriate statistical power, as well as proper control of bias, to allow a meaningful interpretation of the results. The preliminary results of imetelstat clinical trials with smaller sample sizes can be disproportionately influenced by the impact the treatment had on a few individuals, which limits the ability to generalize the results across a broader community, making the trial results less reliable than trials with a larger number of patients. As a result, there may be less certainty that imetelstat would achieve a statistically significant effect in any future clinical trials. Moreover, with respect to the trial design for the planned Phase 3 clinical trial in refractory MF, the FDA urged us to consider adding a third dosing arm to the trial to assess a lower dose and/or a more frequent dosing schedule that might improve the trial’s chance of success by identifying a less toxic regimen and/or more effective spleen response, one of the trial’s secondary endpoints. While we believe that testing a lower dose regimen would likely result in a lower median OS, the trial’s primary endpoint, in the imetelstat treatment arm without a clinically meaningful reduction in toxicity and we therefore determined not to add a third dosing arm to the trial design, our belief may ultimately be incorrect and our failure to add a third dosing arm, as urged to be considered by the FDA, could result in delays or failures to obtain regulatory clearance from the FDA and regulatory authorities in other countries to commence the trial or could result in the trial’s failure, or could otherwise delay, limit or prevent marketing approval of imetelstat.