GERON CORP (GERN) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the section entitled “Business” in Part I, Item 1 and the audited financial statements and notes thereto included in Part II, Item 8 of this annual report on Form 10‑K. The information provided should be reviewed in the context of the sections entitled “Risks Related to the Development of Imetelstat”, “Risks Related to COVID-19” and “Risks Related to Regulatory Compliance Matters and Commercialization of Imetelstat” under “Risk Factors” in Part I, Item 1A and elsewhere in this annual report on Form 10-K.

Company Overview

Summary

Geron is a late-stage clinical biopharmaceutical company that is focused on the development and potential commercialization of imetelstat, a first-in-class telomerase inhibitor. Geron’s vision is to become a leader in the treatment of blood cancers, or hematologic malignancies, and is committed to improving and extending the lives of patients by changing the course of these diseases by targeting telomerase. We believe data from our prior Phase 2 clinical trials provide strong evidence that imetelstat targets telomerase to inhibit the uncontrolled proliferation of malignant stem and progenitor cells enabling recovery of bone marrow and normal blood cell production, which indicate potential disease-modifying activity. We believe this potential disease modification may differentiate imetelstat from other currently approved and investigational treatments in myeloid hematologic malignancies.

We are conducting two ongoing Phase 3 clinical trials that are designed to enable registration of imetelstat: (i) IMerge Phase 3 in lower risk MDS, and (ii) IMpactMF in refractory MF. In the first half of 2022, we plan to start IMproveMF, a Phase 1 clinical trial of imetelstat in combination with ruxolitinib in frontline MF patients. In addition, in 2022, in collaboration with key opinion leaders with expertise in AML, we plan to support one or more investigator-led clinical trials in AML and higher risk MDS to evaluate imetelstat as a single agent and in combination with venetoclax or hypomethylating agents, or HMAs.

For IMerge Phase 3, we expect top-line results to be available in early January 2023, based on current planning assumptions. Assuming the results of IMerge Phase 3 support regulatory submissions, we plan to submit a New Drug Application, or NDA, in the U.S. in the first half of 2023, and a marketing authorization application, or MAA, in Europe in the second half of 2023, for imetelstat in lower risk MDS. Under either priority or standard review for the NDA and, upon potential approval by the FDA, we expect that commercial launch of imetelstat in lower risk MDS in

74

the U.S. could occur as early as the first half of 2024. In Europe, we anticipate review of the MAA by the European Medicines Agency, or EMA, could take approximately 12 months and, if approved, that commercial launch of imetelstat in lower risk MDS in Europe could occur as early as the second half of 2024.

For IMpactMF, under current planning assumptions, we expect the trial to be fully enrolled in 2024. In addition, we expect the interim analysis for overall survival, or OS, for IMpactMF may occur in 2024 and the final analysis in 2025. Because these analyses are event-driven, the results may be available at different times than currently expected.

Imetelstat has been granted Fast Track designations by the FDA for the treatment of patients with transfusion-dependent anemia due to lower risk MDS, who do not have a deletion 5q chromosomal abnormality, also known as non-del(5q), and who are refractory or resistant to treatment with an erythropoiesis stimulating agent, or ESA, and for the treatment of patients with myelofibrosis, or MF, who have relapsed after or are refractory to treatment with a janus associated kinase, or JAK, inhibitor, also known as relapsed/refractory MF. Imetelstat has also been granted orphan drug designations by the FDA in the U.S. and by the European Commission for the EMA in the EU for the treatment of myelodysplastic syndromes, or MDS, and also for the treatment of MF. In October 2021, we gained access to the Innovative Licensing and Access Pathway, or ILAP, in the U.K. through the receipt of an Innovation Passport for imetelstat to treat lower risk MDS.

Stage-Gated Milestone-Driven Commercial Plans for Imetelstat

If imetelstat is approved for marketing by regulatory authorities, we plan to commercialize imetelstat ourselves in the U.S. and may seek commercialization partners for territories outside of the U.S. Given these plans, we have developed a potential commercial launch plan that is driven by the achievement of certain clinical milestones, such as achieving top-line results in lower risk MDS in early January 2023. In 2022, we plan to conduct preliminary commercial preparations, such as enhancing and/or establishing company processes and systems to support a potential commercial launch if imetelstat is approved in lower risk MDS, refining market research in lower risk MDS and refractory MF and hiring commercial leadership in pricing, market analytics and marketing. In addition, we plan to evaluate our strategy for potential commercialization of imetelstat in Europe.

Financial Resources

As of December 31, 2021, we had approximately $212.7 million in cash, cash equivalents, restricted cash and current and noncurrent marketable securities. Under current planning assumptions, we believe our existing capital resources will be sufficient to fund our current level of operations until the end of the first quarter of 2023. If top-line results from IMerge Phase 3 are not available until after the end of the first quarter of 2023, we will require additional capital to reach top-line results in IMerge Phase 3. In any event, we will require substantial additional funding to further advance the imetelstat program, including through completion of IMerge Phase 3 and IMpactMF and conducting the clinical, regulatory and potential commercialization activities necessary to potentially bring imetelstat to market in lower risk MDS and refractory MF.

Note on the COVID-19 Pandemic

The ongoing COVID-19 pandemic is having widespread, rapidly-evolving, and unpredictable impacts on global societies, economies, financial markets, and business practices. We are closely monitoring the impact of the pandemic, the identification of new variants of the COVID-19 virus and related developments, and our focus remains on promoting employee health and safety while continuing to advance the development of imetelstat. For discussion regarding the impact of the COVID-19 pandemic on our business and financial results, see the sub-section entitled “Risks Related to COVID-19” under “Risk Factors” in Part I, Item 1A and Note 6 on Commitments and Contingencies – Risks Related to COVID-19 in Notes to Financial Statements of this annual report on Form 10-K.

Financial Overview

Since our inception, we have primarily financed our operations through the sale of equity securities, interest income on our marketable securities and payments we received under our collaborative and licensing arrangements. As of December 31, 2021, we had approximately $212.7 million in cash, cash equivalents, restricted cash and current and noncurrent marketable securities, and a long-term debt principal balance of $50.0 million.

In June 2021, we drew down the remaining $10.0 million available under Tranche A of the Loan Agreement with Hercules and SVB. This loan amount bears the same interest rate of 9.0% as the initial drawdown under Tranche A. In August 2021, we amended the Loan Agreement to adjust the timing threshold for certain clinical milestones

75

associated with Tranche B under the Loan Agreement. In addition, under the amended Loan Agreement, the minimum cash covenant requirement beginning as of June 1, 2022, was increased from $25.0 million to $30.0 million, and the minimum cash covenant required upon the execution of certain licensing transactions being executed was increased from $30.0 million to $35.0 million. All other terms of the Loan Agreement were unchanged, including the maturity date, interest rate, payment terms, events of default and other covenants.

In December 2021, we drew down $15.0 million available under Tranche B of the Loan Agreement with Hercules and SVB. This loan amount bears the same interest rate of 9.0% as the drawdowns under Tranche A. See Note 8 on Debt in Notes to Financial Statements of this annual report on Form 10‑K for additional information on the Loan Agreement.

Substantially all of our revenues to date have been payments under collaboration agreements, and milestones, royalties and other revenues from our licensing arrangements. We currently have no source of product revenue. While we reported a small profit for the year ended December 31, 2015 due to our recognition of revenue in connection with the upfront payment under a former imetelstat collaboration agreement, until 2015 we had never been profitable, and have not reported any profit since. We have incurred significant net losses since our inception in 1990, resulting principally from costs incurred in connection with our research and development activities and from general and administrative costs associated with our operations. As of December 31, 2021, we had an accumulated deficit of approximately $1.3 billion.

The significance of future losses, future revenues and any potential future profitability will depend primarily on the clinical and commercial success of imetelstat, our sole product candidate. In any event, imetelstat will require significant additional clinical testing prior to possible regulatory approval in the U.S. and other countries. We expect research and development expenses, general and administrative expenses, and losses to substantially increase in future periods as we continue to support the imetelstat development program through late-stage development, including the conduct and completion of IMerge Phase 3 and IMpactMF. To further advance the imetelstat program, including conducting the clinical and regulatory activities necessary to obtain regulatory approval for imetelstat and establishing sales and marketing capabilities to commercialize imetelstat in the U.S. on our own, if regulatory approval is granted, substantial additional capital will be required. If approved for marketing by regulatory authorities outside of the U.S., we may seek potential commercialization partners for such territories. We do not expect imetelstat to be commercially available for many years, if at all.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 of Notes to Financial Statements of this annual report on Form 10-K describes the significant accounting policies used in the preparation of our financial statements. Certain of these significant accounting estimates are considered to be critical, as defined below.

A critical accounting estimate is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (i) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (ii) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes historically have been minor and have been included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are stated fairly in accordance with accounting principles generally accepted in the U.S., and meaningfully present our financial condition and results of operations.

We believe the following accounting estimates reflect our critical estimates and assumptions used in the preparation of our financial statements:

76

Fair Value of Financial Instruments

We categorize financial instruments recorded at fair value on our balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for financial instruments measured at fair value on our balance sheets, including the category for such financial instruments.

Financial instruments classified as Level 1 include money market funds and certificates of deposit, representing approximately 12% of our total financial instruments classified as assets measured at fair value as of December 31, 2021. Financial instruments classified as Level 2 include commercial paper, government-sponsored enterprise securities, U.S. Treasury securities, municipal securities, and corporate notes, representing approximately 88% of our total financial instruments classified as assets measured at fair value as of December 31, 2021. The price for each security at the measurement date is derived from various sources. Periodically, we assess the reasonableness of these sourced prices by comparing them to the prices provided by our portfolio managers from broker quotes as well as reviewing the pricing methodologies used by our portfolio managers. Historically, we have not experienced significant deviation between the sourced prices and our portfolio managers’ prices.

For a further discussion regarding fair value measurements, see Note 2 on Fair Value Measurements in Notes to Financial Statements of this annual report on Form 10‑K.

Leases

On January 1, 2019, we adopted the provisions of Accounting Standards Codification 2016-02, Leases (Topic 842), or ASU 2016-02. Financial results for the reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Accounting Standards Codification Topic 840, Leases, or Topic 840.

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating leases are included in operating leases, right-of-use assets and lease liabilities on our balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of remaining lease payments over the expected lease term. The present value of remaining lease payments within the 12 months following the balance sheet date are classified as current lease liabilities. The present value of lease payments not within the 12 months following the balance sheet date are classified as noncurrent lease liabilities. The interest rate implicit in lease contracts to calculate the present value is typically not readily determinable. As such, significant management judgment is required to estimate the incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment as of the lease commencement date. We evaluate the assumptions used in estimating the incremental borrowing rate by reviewing industry and regional data for operating leases and loans with similar terms. We have not made any revisions to borrowing rate estimates. If the basis for the incremental borrowing rate estimate were to change, then the present value of remaining lease payments could differ significantly which would affect the value recognized for the right-of-use assets and corresponding lease liabilities on our balance sheets. See Note 7 on Operating Leases in Notes to Financial Statements of this annual report on Form 10-K for further discussion of our operating lease obligations.

77

Clinical Trial Accruals

Our current imetelstat clinical trials are being supported by contract research organizations, or CROs, and other vendors. Invoicing from CROs for services rendered can be delayed several months, or longer. We accrue the cost of services rendered in connection with CRO activities based on our estimate of site management, monitoring costs, project management costs, and investigator fees. We accrue expenses for clinical trial activities performed by CROs based upon the estimated amount of work completed on each trial. We maintain regular communications with our CRO vendors to assess the reasonableness of our estimates. To date, differences between actual clinical trial expenses and estimated clinical trial expenses recorded have not been material and are adjusted for in the period in which they become known. However, if we incorrectly estimate activity levels associated with the CRO services at a given point in time, we could be required to record material adjustments in future periods.

For clinical trial expenses and related expenses associated with the conduct of clinical trials, the significant factors used in estimating accruals include the number of patients enrolled, the number of active clinical sites, and the duration for which the patients have been enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through internal reviews, review of contractual terms and correspondence with CROs. For the clinical development activities previously conducted by Janssen under the former Collaboration Agreement, we monitored patient enrollment levels and related activities to the extent possible through discussions with Janssen personnel and based our estimates of clinical trial costs on the best information available at the time.

Valuation of Stock‑Based Compensation

We measure and recognize compensation expense for all share‑based payment awards to our employees and directors, including service-based and performance-based stock options, restricted stock awards and employee stock purchases related to our Employee Stock Purchase Plan, or ESPP, based on estimated grant‑date fair values for these instruments. The grant‑date fair value of share‑based payment awards is amortized over the vesting period of the awards using a straight‑line method and reduced for estimated forfeitures. For performance-based stock options with vesting conditioned on the achievement of certain strategic milestones, stock-based compensation expense is recognized over the period from the date the performance condition is determined to be probable of occurring through the date the applicable condition is expected to be met and is reduced for estimated forfeitures, as applicable. If the performance condition is not considered probable of being achieved, no stock-based compensation expense is recognized until such time as the performance condition is considered probable of being met, if at all. If that assessment of the probability of the performance condition being met changes, the impact of the change in estimate would be recognized in the period of the change. We use the Black Scholes option‑pricing model to estimate the grant‑date fair value of our service-based and performance-based stock options and employee stock purchases.

Option‑pricing model assumptions, such as expected volatility, expected term and risk‑free interest rate, impact the fair value estimate. Expected volatilities are based on historical volatilities of our stock since traded options on our common stock do not correspond to option terms and trading volume of options is limited. The expected term of stock options represents the period of time that stock options granted are expected to be outstanding. In deriving this assumption, we review actual historical exercise and post‑vesting cancellation data and the remaining outstanding stock options not yet exercised or cancelled. For performance-based stock options, we also assess the projected timing of potential achievement of the milestones. The expected term of employees’ purchase rights under our ESPP is equal to the purchase period. The risk‑free interest rate is based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in effect on the date of grant. Forfeiture rates are estimated based on historical data and are adjusted, if necessary, over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from their estimate.

We evaluate the assumptions used in estimating grant‑date fair values of our share‑based payment awards by reviewing current trends in comparison to historical data on an annual basis. We evaluate whether an adjustment to the assumptions of fair value of our common stock and historical volatility are required if observed prices of our common stock materially differ from historical information. We have not revised the methods by which we derive assumptions in order to estimate grant‑date fair values of our share‑based payment awards. If factors change and we employ different assumptions in future periods, the stock‑based compensation expense that we record for share‑based payment awards to employees and directors may differ significantly from what we have recorded in the current period.

Results of Operations

Our results of operations have fluctuated from period to period and may continue to fluctuate in the future. Results of operations for any period may be unrelated to results of operations for any other period. Thus, historical results should not be viewed as indicative of future operating results.

78

We are subject to risks common to companies in our industry and at our stage of development, including, but not limited to, risks inherent in research and development efforts, including the development, manufacture, regulatory approval for and commercialization of, imetelstat; uncertainty of non-clinical and clinical trial results or regulatory approvals or clearances; the future development of imetelstat by us, including any future efficacy or safety results that may cause the benefit-risk profile of imetelstat to become unacceptable; the uncertain and unpredictable drug research and discovery process; overcoming disruptions and/or delays due to the COVID-19 pandemic or geopolitical events; our need for substantial additional capital; enforcement of our patent and proprietary rights; reliance upon our CROs, contract manufacturing organizations, or CMOs, consultants, licensees, investigators and other third parties; and potential competition. In order for imetelstat to be commercialized, we must conduct non-clinical tests and clinical trials to demonstrate the safety and efficacy of imetelstat, obtain regulatory approvals or clearances and enter into manufacturing, distribution and marketing arrangements, as well as obtain market acceptance. We do not expect to receive revenue based on sales of imetelstat for many years, if at all.

Revenues

We previously entered into license or collaboration agreements with companies involved with oncology, diagnostics, research tools and biologics production, whereby we granted certain rights to our non-imetelstat related technologies. As of December 31, 2020, our license agreements related to our human telomerase reverse transcriptase, or hTERT, technology have been terminated or expired due to patent expirations on such technology. The remaining active license agreement was a license related to our specialized oligonucleotide backbone chemistry, as well as patent rights covering the synthesis of monomers, the building blocks of oligonucleotides. This license was terminated effective April 2021. In connection with these agreements, we were eligible to receive license fees, option fees, milestone payments and royalties on future sales of products, or any combination thereof. Also, in connection with the divestiture of Geron’s human embryonic stem cell assets, including intellectual property and proprietary technology, to Lineage Cell Therapeutics, Inc. (formerly BioTime, Inc. which acquired Asterias Biotherapeutics, Inc.) in 2013, we are entitled to receive royalties on sales from certain research or commercial products utilizing Geron’s divested intellectual property.

We recognized license fee revenues of $28,000, $55,000 and $96,000 in 2021, 2020 and 2019, respectively, related to our various agreements. The decrease in license fee revenues in 2021 and 2020 primarily reflects a reduction in the number of active license agreements in 2020 for research licenses related to our hTERT technology, due to the patent expirations on such technology.

We recognized royalty revenues of $1.4 million, $198,000 and $364,000 in 2021, 2020 and 2019, respectively. Royalty revenues in 2021, 2020 and 2019 primarily reflect estimated royalties from sales of cell-based research products from our divested stem cell assets. The increase in royalty revenues in 2021 primarily reflects retroactive royalties of approximately $911,000 on product sales of cell-based research products. The decrease in royalty revenues in 2020 primarily reflects expiration of licenses which eliminated the obligation to pay royalties on product sales.

Future license fee and royalty revenues are dependent on additional agreements being signed, if any, our current license agreement being maintained and the underlying patent rights for the license remaining active. Historical revenues may not be predictive of future revenues. Absent the one-time payment of retroactive royalties, we expect revenues in 2022 to be lower than 2021 as a result of reduced royalties from sales of cell-based research products from our divested stem cell assets.

Research and Development Expenses

During the years ended December 31, 2021, 2020 and 2019, imetelstat was the sole development program we supported. In 2021, we also supported a research discovery program related to potential next generation telomerase inhibitors. For the imetelstat program, we incur direct external, personnel related and other research and development costs. For the years ended December 31, 2021, 2020 and 2019, direct external expenses included costs for our CROs, consultants and other clinical-related vendors, as well as expenses for contract manufacturing and quality activities. For the year ended December 31, 2019, direct external expenses also included 100% of the clinical development costs incurred by Janssen for operational support of the imetelstat program during the transition period. Personnel-related expenses primarily consist of salaries and wages, stock-based compensation, payroll taxes and benefits for our employees involved with ongoing research and development efforts. Other research and development expenses primarily consist of research-related overhead associated with allocated expenses for rent and maintenance of facilities and other supplies.

79

Research and development expenses for the years ended December 31, 2021, 2020 and 2019 were as follows:

The increase in research and development expenses in 2021 primarily reflects higher direct external costs to support the conduct of the ongoing Phase 3 clinical trials, IMerge and IMpactMF, as well as increased costs for producing validation batches at contract manufacturers to enable future production of imetelstat for clinical and potential commercial purposes. The decrease in research and development expenses in 2020 primarily reflects the net result of lower direct external expenses due to the completion of the imetelstat program transition to us from Janssen, the closing of IMbark and reduced purchases of raw materials, drug substance and drug product, partially offset by higher expenses for IMerge Phase 3 and start-up activities for IMpactMF. In addition, personnel-related expenses have increased in 2021 and 2020 as a result of additional development and manufacturing headcount being hired.

Under the terms of the Collaboration Agreement, Janssen was required to provide operational support for the imetelstat program through September 2019 during transition of the program to us, including continuing to support ongoing imetelstat clinical trials. We reimbursed Janssen for 100% of the costs for such operational support. However, costs associated with transition activities, such as transfer of the sponsorship of ongoing imetelstat clinical trials, moving databases and related systems and transmitting regulatory files, were incurred separately by each company, unless otherwise specified in the Collaboration Agreement. As of the end of September 2019, the transition of the imetelstat program to us from Janssen was completed according to the terms of the Collaboration Agreement.

We expect research and development expenses to increase in the future as we support the current two Phase 3 clinical trials of imetelstat, IMerge and IMpactMF, the planned IMproveMF trial and planned investigator-led trials in AML and higher risk MDS. 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 Compliance Matters and Commercialization of Imetelstat” under “Risk Factors” in Part I, Item 1A and elsewhere in this annual report on Form 10‑K.

General and Administrative Expenses

General and administrative expenses were $29.7 million, $25.7 million and $20.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. The increase in general and administrative expenses in 2021 primarily reflects new costs in connection with pre-commercial activities, including costs of $2.8 million for modernizing our internal infrastructure to support a potential commercial launch, and higher legal costs of $1.3 million. The increase in 2020 primarily reflects higher personnel-related costs of $2.6 million for additional headcount to support growing operational activities associated with international clinical trial activities and higher overall company headcount and increased legal costs of $1.6 million. We expect general and administrative expenses to increase in the future as the imetelstat program matures and potential commercialization preparatory activities continue.

Interest Income

Interest income was $527,000, $1.8 million and $4.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. The decrease in interest income in 2021 and 2020 reflects lower yields on our marketable securities portfolio due to declining interest rates. Interest earned in future periods will depend on the size of our marketable securities portfolio and prevailing interest rates.

Interest Expense

Interest expense was $3.7 million and $760,000 for the years ended December 31, 2021 and 2020, respectively. Interest expense reflects interest owed under the Loan Agreement, as well as amortization of associated debt issuance costs and debt discounts using the effective interest method and accrual for an end of term charge. The

80

Loan Agreement was effective September 30, 2020. As such, no comparable interest expense amounts were recognized for the year ended December 31, 2019.

Change in Fair Value of Equity Investment

We remeasured the fair value of our equity investment at each reporting date and any resulting change in fair value based on observable price changes was included on our statements of operations. In the first quarter of 2021, we sold our entire equity investment, resulting in a net realized gain which has been recognized in other income and expense (see below). For the years ended December 31, 2020 and 2019, there was an increase in the fair value of our equity investment of $60,000 and a decrease in fair value of our equity investment of $195,000, respectively, resulting from observable price changes in the equity investment. As a result of the sale of our equity investment in the first quarter of 2021, no comparable change in fair value was included on our statements of operations for the year ended December 31, 2021.

Other Income and (Expense), Net

Net other income was $1.1 million and $168,000 for the years ended December 31, 2021 and 2020, respectively. Net other expense was $69,000 for the year ended December 31, 2019. During the first quarter of 2021, we sold our entire equity investment resulting in a net realized gain of $1.2 million, including foreign currency translation adjustments. During the third quarter of 2020, we recognized other income of $182,000 for the share exchange of our equity investment upon its acquisition. Also included in other income were realized losses of $34,000 for the sales of our equity investment during the third quarter of 2020. See Note 2 on Fair Value Measurements – Equity Investment in Notes to Financial Statements of this annual report on Form 10‑K for additional information about the sales of our equity investment. Other income and (expense) also includes bank charges related to our cash operating accounts and marketable securities portfolio.

Liquidity and Capital Resources

As of December 31, 2021, we had cash, restricted cash, cash equivalents and marketable securities of $212.7 million, compared to $260.0 million at December 31, 2020. The decrease in cash, restricted cash, cash equivalents, and current and noncurrent marketable securities from December 31, 2020 was the net result of cash being used for operations, partially offset by the receipt of net cash proceeds of approximately $20.4 million from sales of our common stock under the 2020 Sales Agreement, as described below, and proceeds from an additional drawdowns of debt. In June 2021, we drew down the remaining $10.0 million available under Tranche A of the Loan Agreement. In December 2021, we drew down $15.0 million available under Tranche B of the Loan Agreement. As of December 31, 2021, we have an outstanding principal balance of $50.0 million in long-term debt. See Note 8 on Debt in Notes to Financial Statements of this annual report on Form 10‑K for additional information on the Loan Agreement.

We have an investment policy to invest our cash in liquid, investment grade securities, such as interest-bearing money market funds, certificates of deposit, U.S. Treasury securities, municipal securities, government and agency securities, corporate notes and commercial paper. Our investment portfolio does not contain securities with exposure to sub-prime mortgages, collateralized debt obligations, asset-backed securities or auction rate securities and, to date, we have not recognized any other-than-temporary impairment charges on our marketable securities or any significant changes in aggregate fair value that would impact our cash resources or liquidity. To date, we have not experienced lack of access to our invested cash and cash equivalents; however, access to our invested cash and cash equivalents may be impacted by adverse conditions in the financial and credit markets.

In May 2018, we entered into the 2018 Sales Agreement with B. Riley FBR, pursuant to which we could elect to issue and sell shares of our common stock having an aggregate offering price of up to $100 million in such quantities and on such minimum price terms as we set from time to time through B. Riley FBR as our sales agent. Pursuant to the 2018 Sales Agreement, B. Riley FBR sold our common stock at market prices prevailing at the time of sale for which B. Riley FBR received an aggregate commission rate equal to up to 3.0% of the gross proceeds. From January 2020 through April 2020, we sold an aggregate of 3,496,616 shares of our common stock under the 2018 Sales Agreement, resulting in net cash proceeds to us of approximately $4.1 million after deducting sales commissions and other offering expenses payable by us. The 2018 Sales Agreement has been superseded by the 2020 Sales Agreement (see below).

On September 4, 2020, we entered into the 2020 Sales Agreement pursuant to which we may elect to issue and sell shares of our common stock having an aggregate offering price of up to $100 million in such quantities and on such minimum price terms as we set from time to time through B. Riley Securities as our sales agent. We pay B. Riley Securities an aggregate commission rate equal to up to 3.0% of the gross proceeds of the sales price per share for

81

common stock sold through B. Riley Securities under the 2020 Sales Agreement. For the year ended December 31, 2021, we sold an aggregate of 10,571,556 shares of our common stock pursuant to the 2020 Sales Agreement, resulting in net cash proceeds to us of approximately $20.4 million, after deducting sales commissions and other offering expenses payable by us. Approximately $79.1 million of our common stock remained available for issuance under the 2020 Sales Agreement as of December 31, 2021. The 2020 Sales Agreement will expire upon the earlier of: (a) the sale of all common stock subject to the 2020 Sales Agreement, or (b) September 4, 2023.

Financing Strategy

We may, from time to time, consider additional funding through a combination of new collaborative arrangements, strategic alliances, and additional equity and debt financings or from other sources. We will continue to manage our capital structure and consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. Any such capital transactions may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.

Future Funding Requirements

Under current planning assumptions, we believe that our existing capital resources, together with future interest income, will be sufficient to fund our current level of operations until the end of the first quarter of 2023. Based on current planning assumptions, we project top-line results from IMerge Phase 3 to be available in early January 2023. If top-line results from IMerge Phase 3 are not available until after the end of the first quarter of 2023, we will require additional capital to reach top-line results in IMerge Phase 3. In any event, we will require substantial additional funding to further advance the imetelstat program, including through completion of IMerge Phase 3 and IMpactMF and conducting the clinical, regulatory and potential commercialization activities necessary to potentially bring imetelstat to market in lower risk MDS and refractory MF. In addition, our ability to commercialize imetelstat in the U.S., if regulatory approval is granted, depends on us being able to establish sales and marketing capabilities.

Because the outcome of any clinical activities and/or regulatory approval process is highly uncertain, we cannot reasonably estimate whether any development activities we may undertake will succeed, and we may never recoup our investment in any imetelstat development, which would adversely affect our financial condition and our business and business prospects, and might cause us to cease operations. In addition, our plans and timing expectations will be further delayed or interrupted if COVID-19 pandemic conditions continue unabated, or worsen, creating further limitations on our clinical trial activities. Our future capital requirements are difficult to forecast and will depend on many factors, including:

82

Until we can generate a sufficient amount of revenue from imetelstat to finance our cash requirements, which we may never achieve, we expect to finance future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, which may not be possible. Availability of such financing sources may be negatively impacted with any further delays in reporting results from IMerge Phase 3 or IMpactMF. For example, if top-line results from IMerge Phase 3 are not available until after the end of the first quarter of 2023, we will require additional capital to reach top-line results in IMerge Phase 3, which may not be possible for us to obtain on acceptable terms, or at all.

Additional financing through public or private debt or equity financings, including pursuant to the 2020 Sales Agreement with B. Riley Securities, the remaining $25.0 million Tranche C drawdown under the Loan Agreement to the extent available, capital lease transactions or other financing sources may not be available on acceptable terms, or at all. We may be unable to raise equity capital, or may be forced to do so at a stock price or on other terms that could result in substantial dilution of ownership for our stockholders. The receptivity of the public and private debt and equity markets to proposed financings has been substantially affected by uncertainty in the general economic, market and political climate caused by the effects of the COVID-19 pandemic, and may in the future be affected by other factors which are unpredictable and over which we have no control. In this regard, the effects of the COVID-19 pandemic have increased market volatility and could result in a significant long-term disruption of global financial markets, which could reduce or eliminate our ability to raise additional funds through financings, and could negatively impact the terms upon which we may raise those funds. Similarly, the current conflict between Ukraine and Russia has created extreme volatility in the capital markets and is expected to have further global economic consequences. If the equity and credit markets deteriorate, including as a result of a resurgence of COVID-19, political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Political unrest, such as the current situation with Ukraine and Russia, may also cause volatility and disruption in the global economy. If we are unable to raise additional capital or establish alternative collaborative arrangements with third-party collaborative partners for imetelstat, the development of imetelstat may be further delayed, altered or abandoned, which might cause us to cease operations.

In addition, we may seek additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Due to uncertainty in the general economic, market and political climate, we may determine that it is necessary or appropriate to raise additional funds proactively

83

to meet longer-term anticipated operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, including pursuant to the 2020 Sales Agreement, your ownership interest may be diluted, and the terms may include liquidation or other preferences that materially and adversely affect your rights as a stockholder. In addition, we have borrowed, and in the future may borrow, additional capital from institutional and commercial banking sources to fund imetelstat development and our future growth, including pursuant to our Loan Agreement or potentially pursuant to new arrangements with different lenders. We may borrow funds on terms under agreements, such as the Loan Agreement, that include restrictive covenants, including covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Moreover, if we raise additional funds through alliance, collaborative or licensing arrangements with third parties, we may have to relinquish valuable rights to imetelstat or our technologies or grant licenses on terms that are not favorable to us.

We cannot assure you that our existing capital resources, future interest income, and potential future sales of our common stock, including under the 2020 Sales Agreement with B. Riley Securities, or potential future drawdown, if available, of the remaining $25.0 million of Tranche C under our Loan Agreement, will be sufficient to fund our operating plans. In this regard, under the Loan Agreement, our ability to draw down any funds under Tranche C is subject to certain conditions, including approval by an investment committee comprised of Hercules and SVB. Without investment committee approval, we will not be eligible to draw down any funds under Tranche C of the Loan Agreement, and we will need to obtain additional or alternative financing to advance our development of imetelstat.

In any event, we will continue to need substantial additional funds to meet operational needs and capital requirements to advance the imetelstat program in clinical development, including through completion of IMerge Phase 3 and IMpactMF and potential commercialization of imetelstat in lower risk MDS and refractory MF, and our need for additional funds may arise sooner than planned. If adequate funds are not available on a timely basis, if at all, we may be unable to pursue further development, including completing IMerge Phase 3 and IMpactMF, or commencing, conducting or completing potential future clinical trials of imetelstat, such as IMproveMF and planned investigator-led clinical trials in AML and higher risk MDS, or pursuing potential commercialization of imetelstat, which would severely harm our business and we might cease operations.

Cash Flows from Operating Activities

Net cash used in operating activities was $95.6 million, $66.7 million and $43.8 million in 2021, 2020 and 2019, respectively. The increase in net cash used in operating activities in 2021 and 2020 primarily reflects higher payments for research and development expenses in connection with supporting the current Phase 3 clinical trials, IMerge and IMpactMF, manufacturing validation batches of imetelstat and increases in headcount.

Cash Flows from Investing Activities

Net cash provided by investing activities in 2021 and 2019 was $71.9 million and $27.4 million, respectively. Net cash used in investing activities in 2020 was $105.3 million. Net cash provided by investing activities in 2021 and 2019 primarily reflects a higher rate of maturities than purchases of marketable securities. Net cash used in investing activities in 2020 primarily reflects a higher rate of purchases than maturities of marketable securities resulting from the investment of net cash proceeds from the underwritten public offering completed in 2020.

For the three years ended December 31, 2021, we purchased approximately $1.0 million in property and equipment, none of which was financed through equipment financing arrangements.

Cash Flows from Financing Activities

Net cash provided by financing activities in 2021, 2020 and 2019 was $48.6 million, $168.3 million and $19.5 million, respectively. Financing activities in 2021, 2020 and 2019 primarily reflect the receipt of net cash proceeds from the sales of our common stock under the 2020 Sales Agreement in 2021, the receipt of $140.2 million in net proceeds from the underwritten public offering of common stock, pre-funded warrant and stock purchase warrants in May 2020, receipt of net cash proceeds from the sales of our common stock under the 2018 Sales Agreement with B. Riley FBR in 2020 and 2019 and aggregate drawdowns of $25.0 million in each of 2021 and 2020 under the Loan Agreement with Hercules and SVB.

84

Contractual Obligations

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Our contractual obligations primarily consist of our obligations under non-cancellable operating leases. The aggregate amount of future operating lease payments over the term of our leases is $6.7 million as of December 31, 2021. For additional information on our leases and timing of future payments, see Note 7 on Operating Leases in Notes to Financial Statements of this annual report on Form 10‑K.

In the normal course of business, we enter into agreements with CROs for clinical trials and CMOs for clinical supply manufacturing and with other vendors for preclinical research studies, investigator-led trials and other services and products for operating purposes. We have not considered these payments to be contractual obligations since the contracts are generally cancelable at any time by us upon less than 180 days’ prior written notice. We also have certain in-license agreements that require us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial milestones. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones, which may not be achieved.