How This Tiny Bay Area Biopharma Could be a Million-Maker Stock

December 13, 2016
By Mark Terry, BioSpace.com Breaking News Staff

The upcoming year could be make-or-break for Menlo Park, Calif.-based Geron Corporation . With only a single, but promising drug and a development partnership with Janssen Biotech , a subsidiary of Johnson & Johnson , it has a lot of potential, but faces potential disasters. Maxx Chatsko, writing for The Motley Fool, takes a look at the company’s pros and cons.

The company has a single pipeline candidate, imetelstat (GRN163L). It is a telomerase inhibitor administered by IV infusion. In November 2014, Geron inked an exclusive global license and collaboration deal with Janssen. Geron received $35 million as an initial payment, with additional payments that could total $900 million for various milestones, as well as royalties on worldwide net sales.

Around the same time, the U.S. Food and Drug Administration (FDA) removed a full clinical hold on the company’s investigational new drug (IND) application for the drug. The agency indicated that the company’s clinical development plan for imetelstat, which focused on high-risk myeloid malignancies, was acceptable. At that time, the company did not play to develop the drug for use in the treatment of essential thrombocythemia (ET) or polycythemia vera. The clinical hold was related to liver function test abnormalities.

In September of this year, the company gave updates on hits Phase II trial in intermediate-2 or high-risk myelofibrosis (MF). The dosage was determined to be good and safe, but it needed more patients for efficacy data.

At that point, Keith Speights, also writing for The Motley Fool, said, “Next year could be make-or-break for Geron. J&J plans to review data of the myelofibrosis study in the second quarter of 2017 to determine next steps. A decision about whether to move forward to the second part of the MDS study of imetelstat also will be made in the second quarter.”

Geron has taken a hit this year, trading down about 60 percent, currently for $2.01.

Chatsko argues that this is largely because the company hasn’t had much to do while Janssen runs its clinical trials. A lot is resting on those clinical trials. He cites Incyte (INCY) as a stock that has risen 700 percent since mid-2010 on its Jakafi treatment for blood cancers. That gives tremendous hope to Geron if it can get approved. But that’s not all that easy to do, as Gilead Sciences showed, when its momelotinib didn’t compare well with Incyte 's Jakafi.

Still, just making it to Phase III would bring in up to $65 million in milestone payments from Janssen. Chatsko writes, “Geron is then eligible for up to $470 million in additional development and regulatory milestones, up to $350 million in sales milestones, and tiered royalties in the double digits—and even up to the low 20s if the company buys back a part of the sales rights in the United States. That represents considerable upside for a company that currently generates essentially no revenue at all and could, theoretically, result in multibagger, millionaire-maker returns.”

Or it could fail. A clinical update in September wasn’t all that promising. The low-dose arm didn’t present significant improvements and won’t accept new patients. The high-dose arm didn’t have enough patients to meet the interim criteria for checkup, but was promising.

Chatsko writes, “The IMerge Phase II trial did not have an interim update, but it does suffer from an awful design. Consider that it includes just 20 patients in a single-arm study. That means it won’t be tested against a placebo or with different doses of the company’s drug. Although that could allow it to be carried to Phase III, it could also hide the possibility that imetelstat isn’t an effective treatment in myelodysplastic syndromes.”

Time will tell, but it’s clearly a gamble, although with shares trading around $2, perhaps not a huge gamble with a big potential. Chatsko concludes, “While the upside for approval is incredible, clinical or market failure would likely be the end of the company. It doesn’t have anything else in its pipeline and has only $100 million in cash on hand. The binary nature of the stock should make most investors think twice before taking a position.”