Friday, November 16, 2012

Geron, BioTime Deal Moves Forward with Letter of Intent

Geron Corp., which once pioneered human embryonic stem cell research, is close to selling off its hESC business in a complicated deal involving two former CEOs of the company and BioTime, Inc., of Alameda, Ca.

The two publicly traded firms yesterday announced a “letter of intent” involving a transaction in which BioTime would acquire the assets of Geron's hESC clinical trial that the company suddenly abandoned last year. The firm also laid off 66 people, about 40 percent of its staff.

Abandonment of the program came only a few months after the $3 billion California stem cell agency loaned Geron $25 million to assist in the trial. The agency could restore the loan for the trial, but the Geron-BioTime announcement did not mention that possibility. The California Stem Cell Report has asked the agency for comment.

The letter of intent came one year and one day after Geron announced that it was giving up the hESC spinal injury trial because of financial reasons. The Menlo Park, Ca., firm has been trying to sell its hESC assets since then. BioTime has been the only firm to express public interest. The Geron trial was the first hESC trial approved by the FDA.

The proposed deal involves Michael West, who founded Geron and is now head of Biotime, and Tom Okarma, who was CEO of Geron from 1999 to 2011. Okarma is now head of BioTime Acquisition Corp.,(BAC) a subsidiary of BioTime.

Here is how yesterday's press release described the deal in which BioTime would acquire Geron's “intellectual property and other assets related to Geron’s discontinued human embryonic stem cell programs.”
“ BioTime would contribute to BAC $5 million in cash, $30 million of BioTime common shares, warrants to purchase eight (8) million common shares of BioTime at a pre-specified price, rights to use certain human embryonic stem cell lines, and minority stakes in two of BioTime’s subsidiaries. In addition, a private investor would invest $5 million in cash in BAC. 
“Following consummation of the potential transaction, Geron stockholders would receive shares representing 21.4% of the common stock of BAC as well as warrants to purchase 8 million shares of BioTime common stock at a pre-specified price. BioTime would own approximately 71.6%, and a private investor would own approximately 7.0% of the outstanding BAC common stock for their $5 million investment. BioTime would also receive warrants that would enable it to increase its ownership in BAC by approximately 2%, which would reduce the Geron stockholders’ ownership in BAC to 19.2%. BAC would also be committed to pay to Geron royalties on the sale of products that are commercialized in reliance upon Geron patents acquired by BAC.”
Prior to release of the letter of intent, an article earlier this week by Vickie Brower in The Scientist said,
“The offer couldn’t come at a better time for Geron, which in recent months has started to feel pressure from its shareholders to boost its stock price and move products through the pipeline. Since last November, when the company announced its decision to shutter its hESC and regenerative medicine business and funnel its resources into developing telomerase-related treatments for cancer, the stock price has dropped more than 50 percent to $1.30 a share. Geron claimed the move was simply to save money, but many took the decision—which effectively terminated a clinical trial of an hESC treatment for spinal cord injury—as a setback for the entire field." 
News coverage of yesterday's announcement was light. Here is a link to a piece by Ryan McBride on Fierce Biotech.

Geron's stock price closed at $1.21 yesterday and rose to $1.24 in after hours trading. BioTime closed at $2.97. No after hours trading was reported for BioTime.

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