Geron's (Nasdaq: GERN) move away from stem-cell research last year didn't seem like that bad of an idea. While certainly cutting edge, stem-cell research is still in its infancy on a science research timeline. Hunkering down and waiting for its cancer drug pipeline to read out seemed like a less risky and quicker way to profitability.

Of course, risk is all relative -- and in biotech, less risky can still be very risky. Geron said Monday that its lead cancer drug imetelstat failed a phase 2 trial in breast cancer. Investors weren't expecting the data this early, but the Internal Safety Monitoring Committee noticed a greater number of deaths and number of patients discontinuing the chemotherapy used in combination with imetelstat in patients taking both drugs compared to the control group taking just the chemotherapy.

An unplanned interim analysis was performed, and, sure enough, patients taking the combination therapy seem to be progressing faster than patients that only received chemotherapy. With no reason to continue the trial, Geron is cutting its losses and ending the trial.

And it gets worse. Imetelstat was also being tested in lung cancer, and the company is stopping that trial because an interim analysis suggests that the drug is unlikely to show a statistically significant improvement. At least in the lung-cancer trial, the drug seems to be having a modest effect, just not enough to warrant continued development in lung-cancer patients.

Since imetelstat isn't having a negative effect on patients in the lung-cancer trial when used by itself, the worse prognosis for patients taking imetelstat with chemotharapy in the breast-cancer trial is likely tied to overlapping toxicities of the two drugs, which led to decreases in chemotherapy use.

That little tidbit should give investors a glimmer of hope for two remaining trials in blood cancers that are set to read out in the fourth quarter. Failure in one tumor type doesn't necessarily mean that the drug won't work in other types of cancer, since the drug accumulates in different parts of the body at different concentrations and different tumor cell types may be more dependent on telomerase, which imetelstat inhibits, for their proliferation. Onyx Pharmaceuticals (Nasdaq: ONXX) and Bayer's Nexavar, Pfizer's (NYSE: PFE) Sutent, and Regeneron Pharmaceuticals (Nasdaq: REGN) and Sanofi's (NYSE: SNY) Zaltrap are all approved in at least one tumor type, but have failed in other indications.

With $122 million in cash at the end of the second quarter, investors are only valuing imetelstat and its other phase 2 cancer drug GRN1005 at about $40 million. Given the risk-reward proposition, the company looks reasonably priced but is only appropriate for the most speculative part of your portfolio.

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