Back in Love With Geron

Investors' love / hate relationship with Geron (Nasdaq: GERN  ) is back in the worship phase, with the stem cells company up 17% on Friday and nearly an additional 10% or so today.

The reason for the rekindled relationship? Geron announced that the Food and Drug Administration had lifted its clinical hold on a trial testing its stem cell-based therapy, GRNOPC1, in patients with spinal cord injuries.

The agency paused the trial nearly a year ago after an experiment in animals showed a higher frequency of cysts forming. Cysts could turn into tumors, although there wasn't evidence that these cysts would. Nevertheless, the safety-conscious FDA put a hold on the trial anyway.

Geron has since developed tests to ensure the purity of the GRNOPC1 and completed additional animal studies, which seems to be enough to satisfy the FDA.

That's great, but let's keep this in perspective, Fools.

  • This is a phase 1 trial.
  • GRNOPC1 is the first embryonic stem cell-based therapy to make it into clinical trials. How often does the first new therapy work?
  • During the first seven months the trial was originally open, no patients enrolled.

Geron says it could enroll the first patient this quarter, but there's no doubt this is going to be a long, uphill battle.

That's not to say embryonic stem cells aren't exciting. But so was gene therapy, which hasn't amounted to much. Investors were exuberant about Pfizer (NYSE: PFE  ) and Nektar Therapeutics' (Nasdaq: NKTR  ) inhaled insulin Exubera until they saw the sales. Alnylam Pharmaceuticals' (Nasdaq: ALNY  ) RNAi technology has proved successful, but there's still considerable risk because its lead drug isn't even in phase 3 trials yet. I could go on and on.

While embryonic stem cell-based therapy could be Geron's biggest seller, the company has a more advanced product, Imetelstat, which Geron started a phase 2 clinical trial for last month. Treating second-line lung cancer patients might not be as exciting as embryonic stem cells, but it could be a slightly less risky pathway to revenue.

Either way, at a market cap now topping $600 million, Geron looks awfully expensive for the risk involved. Cheaper Exelixis (Nasdaq: EXEL  ) , with more and further-advanced drugs, may be a better option for investors.

Exelixis is a Motley Fool Rule Breakers pick. Find out why The Motley Fool picked it for our high-growth newsletter by grabbing a 30-day trial subscription. You'll get access to all our back issues and the most recent picks. 

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Motley Fool Inside Value recommendation. The Fool owns shares of Exelixis and has a disclosure policy.


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  • Report this Comment On August 02, 2010, at 4:37 PM, LabCoyote wrote:

    Hi Brian,

    As a cancer laboratory guy, I have to take issue with a couple points in your article. First "Cysts could turn into tumors." A cyst is an almost sure sign that a growth is NOT a tumor and is benign. These are very different processes. Cyst growth would be a setback for this therapy (and it was!), but it is completely different from a tumor process, which would likely kill the therapy completely.

    Beside this, I have some doubt about the long uphill battle. While enrollment might be a problem, it is expected that, if the therapy works, there will be significant results within 30 days. It might be a long battle, but we could also see paralyzed patients in physical therapy by Christmas. What a present that would be!

    I understand you are not reporting on the company's science, but it would be a shame if foolish investors missed out on this lottery ticket stock if it pops. The odds are that Geron still has a long slog ahead of it, but if it pops good news, it could get very hot very fast.

    I have been invested in Geron (originally at $55) since 1999. I am not unbiased, but this science is VERY sexy :-)

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