Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Geron Earnings Conference Call. My name is Derek, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Dr. Anna Krassowska, Head of Investor Relations. Please proceed.

Thank you. Good afternoon, and welcome to the Geron Fourth Quarter and Year End Earnings Call. With me on this call this afternoon are Dr. John Scarlett, our Chief Executive Officer; Graham Cooper, our Chief Financial Officer; Dr. Stephen Kelsey, our Head of R&D and Chief Medical Officer; and Olivia Bloom, our Chief Accounting Officer. Today's call is being webcast live on the company's website and will be available for replay until March 31. I would like to remind you that except for statements of historical fact, the statements in this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the timelines and plans for Geron's research and product candidates and financial or operational projections or requirements including the need for additional cash. These statements involve risks and uncertainties that can cause actual statements to differ materially from those in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in Geron's periodic reports filed with the Securities and Exchange Commission under the heading Risk Factor, including in the annual report on Form 10-K for the year ended December 31, 2011. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made and the facts and assumptions underlying the forward-looking statements may change. Except as required by law, Geron disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. I will now hand over to Graham Cooper, our Chief Financial Officer, to cover the fourth quarter and annual financial results.

Thank you, Anna. Good afternoon, everyone. I am pleased to be joining for my first earnings call as Geron's CFO. We will begin the call with a summary of the operating results for the quarter and for the year ended December 31, 2011. Our agenda then includes an overview from Chip Scarlett of recent operating highlights. For those updates will be -- following those updates, we'll be pleased to take your question. In the fourth quarter of 2011, Geron's net loss of $31.9 million or $0.25 a share is compared to a net loss of $59.4 million or $0.59 per share for the fourth quarter 2010. For the year ended December 31, 2011, Geron reported a net loss of $96.9 million or $0.78 per share as compared to a net loss of $111.4 million or $1.14 per share for the year ended December 31, 2010. Revenues were $251,000 in the fourth quarter compared to $1.1 million in the comparable 2010 period. Revenues for the 2010 fourth quarter included funding under a collaborative agreement. For 2011, total revenues were $2.4 million compared to $3.6 million for 2010. In terms of operating expense, total operating expenses for the fourth quarter of 2011 were $30.7 million, which included restructuring charges of $5.4 million, compared to $60.7 million for the fourth quarter of 2010, which included a charge of $35 million in connection with the in-license of GRN1005 from Angiochem. Total operating expenses for the year ended December 31, 2011 were $98.6 million, which compares to $114.7 million for the year ended December 31, 2010. Noncash operating expenses for the fourth quarter of 2011 were approximately $6 million, which included stock-based compensation, write-downs of excess lab equipment related to the stem cell programs and expense for stock issued for services. For the comparable quarter…

Thanks, Graham, and good afternoon, everyone. As you know, 2011 was a year of significant change for Geron. In the past, the company was known as a leader for developing therapies from human embryonic stem cells for the treatment of a variety of chronic and degenerative conditions, including spinal cord injury. Last year, we made the decision to narrow the focus of the company to the oncology programs and to divest our stem cell programs. We're currently talking to a number of interested parties in what is a competitive process for these programs. As I'm sure all of you will understand, while this process is ongoing, we can't give any further color on these discussions or really speculate on the potential outcome. Even before Geron began working in stem cells, the company had begun developing telomerase inhibitors for cancer. The current product candidate, imetelstat, was put into the clinic by Geron in 2005. Subsequently, the company committed to deepen its oncology development capabilities and hired our Chief Medical Officer, Steve Kelsey, in 2009. Steve and his team put imetelstat into Phase II clinical studies beginning in July of 2010. At the end of 2010, Geron in-licensed GRN1005 in order to begin a second oncology development program, in this case, focusing on brain metastases. Both imetelstat and GRN1005 are first-in-class compounds that target major unmet medical needs in cancer. With regard to imetelstat, we're currently sponsoring 4 ongoing Phase II studies. Two of these studies are in solid tumors, one in metastatic breast cancer and one advanced non-small cell lung cancer. The other 2 studies are in hematologic malignancies, one in essential thrombocythemia and one in multiple myeloma. The choice of these indications and the design of these studies are based on several key observations from a nonclinical and Phase I…

[Operator Instructions] And our first question is coming from the line of Karen Jay from JPMorgan.

It's Karen Jay in for Cory Kasimov. I just have 2 questions. The first question is on the imetelstat programs, or actually, it's more on your cash level. A commentary from Graham was that you could run the programs on the finished readout and beyond. And I'm wondering if in the best-case scenario you have 2 Phase II readouts that are very good from the breast cancer and lung cancer trials, do you have enough cash to support initiation of at least one pivotal trial?

Thanks, Karen. So I think the answer to that question is no. We would not intend to launch a Phase III program and Phase III studies in either program without additional resources or another transaction on the partnership front. The cash is certainly -- we clearly believe it's sufficient to get through the results of the Phase II trials, but we would expect to require additional resources to take the programs into Phase III.

Okay. And then maybe for Steve, if you had to prioritize the programs -- I know it would mean largely data-driven, but are there other factors that you would consider, size of the market or size of the clinical program, or aftermarket that would make one indication more attractive than the other?

Karen, are you referring to the indications to which we're...

I'm sorry, breast cancer versus lung.

Breast versus lung. I don't think that we're prepared to make that statement right now. I mean, these are both, as you know, have been both major epithelial tumors with a huge residual unmet medical need, particularly in the metastatic setting. And I think as you press us to your question, we'll drive that based on data.

Your next question is coming from the line of Brian Klein from Lazard Capital Markets.

So first on 1005, I'm just wondering since they are open label studies, the 2 trials, and they're each enrolling 50 patients per cohort, why do you think it's going to take until the second quarter of next year to see that data? Shouldn't we be able to see that some time sooner?

Well, I'll take that one, Brian. I think that we haven't really seen the true enrollment rates yet, and we don't actually have experience in doing studies in brain metastases. So I think we can absolutely commit to try and have those data by that point in time. But honestly, I don't think we know the answer if it will happen sooner. If it happens sooner and we get the data, it will end up getting reported, right? But I think we just don't have any data to make sure that we put a target out there that we don't disappoint people with. So...

Got it. And how often are the patients assessed whether CAT scans in those trials?

First, the primary analysis of the disease inside the brain is with MRI, but that's a trivial technical detail. The frequency of assessment is every 6 weeks.

Great, okay. And then on the imetelstat, you mentioned the multiple myeloma study is initiating a new site.

Yes.

Approximately how many patients do you expect will have data for by the end of the year?

Great question. We have projected somewhere in the region of 15. Whether or not we will get that number of patients entirely depends on how our 2 investigators performed and their ability to find suitable patients for this study. This is a -- as Chip said, this is a heavily biomarket driven study with a lot of complexity, and patients have to be highly motivated to participate in this study outside of what you would consider to be the standard pattern of care. So it's a tough nut to crack, but we will see what we can.

And can you just remind us how often those patients are having their bone marrow biopsies?

At the moment, the bone morrow biopsies are every 2 cycle -- actually that's not strictly 2. The first assessment is after 2 cycles, which is every 8 weeks. The second assessment is at 6 months. So it's essentially 2 months and 6 months.

Great. And then last question just on non-small cell lung cancer with imetelstat. Are you also assessing the patients' tumors for underlying mutation analysis?

We are not prospectively doing that analysis. That analysis is being done by the investigators and the information that is available will be collected. But we're not actually requiring that those analysis are done as part of any planned interim our subset analysis. What we are doing is under an optional agreement with the patients and the investigators, we are collecting tissue for our own internal predictive diagnostics program, which is predominantly focused at this stage on an assessment of tumor telomere length.

Great. And then actually if I can just have one question on the stem cell program. Just wondering if in your discussions with potential acquirers, are you also planning to out-license the revenue stream you'll be receiving from GE for their product?

I think it's really better for us to stay away from any commentary about the stem cell divestiture process. We're in the midst of a process, and it's just probably not a good idea for us to go there. So, I'm sorry, I'll just how to respectfully decline that one.

Your next question will be coming from the line of Ren Benjamin from Rodman.

I guess just starting off with the ongoing randomized studies. Can you talk to us or give us any color around the stopping decisions or the go/no-go decisions that will be taking place at the end of the year when the data comes out? Will it strictly be driven by statistics, or in the case of maybe the non-small cell, will you be looking more at direction of benefit? Can you give us any color there?

Yes, that's a very complex question with a complex answer, but I'll sort of try and distill it into its nuts and bolts. So clearly, decisions regarding whether we move forward with imetelstat in either indication are going to be driven by a combination of efficacy and safety and tolerability. So those are the first 2 major denominators that go into the decision. And as you know, the lung cancer study, we're using single-agent imetelstat. The breast cancer study, we're using it in combination with paclitaxel. So there's every reason to believe that the safety tolerability profile between those 2 indications may be different. With regards to the efficacy profile, we pinned our assessments of efficacy on what we believe at the moment to be a meaningful clinical benefit. Now there clearly are some statistical assumptions baked around what we believe to be meaningful clinical benefit. But fundamentally, we'll be making our decisions going forward based on that and not based on whether or not any particular hazard ratio or p-value is obtained.

And can you tell us what that meaningful clinical benefit is?

Yes. Based on our estimates of historic dates for the patient population that we're enrolling in the 2 studies, we believe that an increase in progression-free survival of around 3 months for breast cancer and around 2 months for lung cancer would be meaningful.

Great, okay. And then just switching gears to the ET study. Can you give us an idea as to why you think it could be enrolling slower than you had originally projected? And could that enrollment rate pick up going forward, or do you think this is the kind of established rate?

I think there are different reasons in -- at different sites and in different areas. One of the issues that we have encountered are competing studies, particularly from the JAK2 inhibitors, which now that they have approval in myelofibrosis have expanded their sphere of interest. And there are other competing studies with [indiscernible]. The other thing is that I think we've learned is that, obviously, this patient population again needs to be highly motivated in order to want to receive what is an intravenous drug as supposed to an oral conventional therapy that they might want to receive. We have done a number of things to increase the rate of enrollment into the study, and we're continuing to do those things. And I think there is every reason to believe that enrollment will pick up as the year goes on, although I still think that we will end the year probably with fewer patients than we had originally intended, although still with sufficient patients' data to make meaningful assessments of whether we have a drug that's worth continuing investment in here.

And would it make sense to start thinking about, I guess, right now any sort of combination studies?

Yes. Well, that's exactly what we're doing, and I think that we'll be able to share those plans with you probably sometime in the second half of this year.

Okay. And then just moving on to the multiple myeloma study. Can you just help me understand or give us a little bit more color on how you assess the effect on the cancers stem cell? Is it biomarker-driven primarily? If so, what are the biomarkers?

There are 2 main assessments in the study. One is the ability of myeloma colonies to grow in a semi-solid culture system. So we take -- or we, I say, this is, in fact -- obviously, our clinical investigators take marrow from the patients. The progenitor cells are isolated and then they are grown in a culture system. And the myeloma colonies that grow are very distinct from the normal hematopoietic colonies that grow. So you can physically tank them. That the first assessment. The second assessment is that actually there are actually a very small number of myeloma progenitor cells circulating the peripheral blood of patients with myeloma, and these are identifiable and quantifiable by flow cytometry. That's a slightly more experimental procedure, but it's nevertheless, possible. It's been published, we're doing that as well.

Okay. And just one for Graham, maybe. You had mentioned that the full year R&D for 2011 was about $70 million or so. And I think you mentioned that the $25 million of which was stem cell-related. So is it fair to assume about $45 million in R&D expenses this year?

No, because we have some offsets. So while we are going to benefit from the cash savings or not, spending on stem cell program R&D substantially in 2012, the 1005 program, in particular, is an offset. We're spending, obviously, a lot more money in 2012 on the 1005 program than we did in 2011.

Got it, okay. And I guess just because I haven't heard Chip yet, one for Chip. Just -- you had mentioned that, obviously, you have the cash wherewithal to turn over the cards of the Phase II programs that are ongoing. You also have the cash wherewithal to develop in-house products going forward, although you can't talk about a bit much on this call. Any thoughts regarding in-licensing more products? And if so, would it be, again, focused more on oncology, or do you think you might diversify to other indications?

So it would be in oncology. It's hard enough to build a really competent organization from all aspects running from research to clinical development to pre-commercial activities. And that's a big challenge for a company our size to do. It's very hard to do that across multiple different therapeutic areas. So any activities for the foreseeable future would be expected to be in oncology, we're projecting here. I don't have any thing in particular in mind. And I guess that's the next thing as I -- we don't have anything particular in mind today. I think we will always be opportunistic to look at other activities. But we do not anticipate this year having any particular new initiatives or new product or new candidates going into the marketplace. So I wouldn't be waiting with bated breath for that.

Your next question is coming from the line of Mike Kay from Kay Associates.

Given the potential that the -- your products have, have there been overtures from any of the large pharmaceutical companies to either go on some type of partnership with you, or to actually acquire the company since given their expertise, marketing abilities and other kinds of experiences that may facilitate the development of the drug and also increase shareholder value?

Well, obviously even if we had, had that, I don't think I'd be in a position to make any comments right now or going forward. That's the kind of deal, Mike, that you have to wait until you have something real to offer to people, and then you announce it. So I really can't comment about it, and I wouldn't want to lead anyone on. So we'll just leave it at that.

But can't you just say if any large companies have approached the company in terms of a partnership or possible acquisition without naming names?

It is -- so you're asking something that is confidential, so I'm not going to be able to answer that.

I wouldn't tell anyone. It'll just be between me and you.

Mike, I love it. Thank you very much.

We can probably set some expectations with people, which is that we're in Phase II trials, and typically, it's unusual to do partnerships when you're in the middle of your programs. You typically would wait for the data and get the economics of what you hope to be positive data on that event. And so in terms of setting the appropriate expectations of investors, I think it'd be fair to say that we would expect that, that's a far more likely thing to happen with Phase II data in hand rather than while we're in the middle of Phase II trial.

Your next question is coming from the line of David Walterman [ph], private investor.

Dr. Scarlett, I've been an investor for 6 years, Dr. Anna knows me, and I'm just hoping we can recover. We've spent hundreds -- and I know you're doing the best you can. We have spent hundreds and millions of dollars so far in stem cell research, and I know you're limited on the color you can give. You said several parties are interested. I'm just hoping -- are you optimistic like you were earlier in the call on other parts of the business that we can recover at least a reasonable amount of our past expenditures on the stem cells? Because we've spent hundreds of millions of dollars.

Indeed, I understand the reason for your question. And the honest answer is, no, I can't give you any assurances, and I can't really give the any color on it right now. We're in the middle of the process. We just have to see what it brings. I can assure you that we have -- that we are making every effort possible. We are engaged with -- we have, I think, talked with every reasonable likely group. We have taken every kind of incoming call. We have engaged Stifel as bankers to help us with that process, and our goal in all of this is to maximize the value that we bring back to the company because exactly your point of the amount of capital that's been committed, all I can tell you, we're doing the very, very best we can, and I believe that could be done. Beyond that, unfortunately, I can't say anything more.

Well, I understand, doctor. But can I just ask you one quick follow-up? Are you at least optimistic -- I'm not asking for a prediction, but earlier in the call, you're optimistic on other parts of the business prospects of the company. I don't want to put words in your mouth, but there's been a lot of pain the last 6, 7 years with shareholders. I don't know anybody that's made any money on the stock. I know you guys are doing the best you can, but it would make me, and I'm sure a lot of shareholders, feel better and more confident if you're at least optimistic on the process so far. Just optimistic, just something that would just make us be a little more confident because there's very little confidence on my end based on the pummeling the stock has taken the last several years, right? And again, no disrespect.

Appreciate that and appreciate the point of view that you represented. And that's a point of view represented by many of our shareholders. So there -- I completely get it. I think I -- as I said, I think our goal is to maximize this, and I believe that we have a competitive process. That would be my principal comment. And it is a -- I believe, a very professionally-run competitive process. But because it's a competitive process, the last thing I want to be doing is making any commentary that colors this. I can assure you that there must be people listening in on the call who are not only interested with regard to their own pocketbook, but from also the perspective of people who are there. I think if you want to look to what we are doing that we can talk about, it's really the creating -- the value that we're creating with imetelstat and 1005 and the oncology franchise, which we've obviously spent all this call on. So I appreciate very much your point of view, and we will tell you whatever we can tell you when we can tell you, as soon as we can. Best I can do, sorry.

At this time, I'm showing a further questions in queue. I would like to turn the call back over to Dr. Scarlett for any closing remarks.

Well, thanks a lot, everyone, for dialing in. I appreciate the -- all the questions and interest in the company, and we really look forward to future communications as we progress throughout the year. So, everyone, have a great day. Thank you.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.