When Giving Up Is a Good Move in Biotech

Geron (Nasdaq: GERN  ) is giving up on stem cells. That's like Krispy Kreme Doughnuts without glazed treats, or Apple without Macintosh.

That is, if doughnuts and computers lost money and weren't for sale yet, and there was no guarantee that they'd ever be on the market.

 I don't see this as the worst news ever for Geron. Anyone who's read my articles over the past few years knows that I think companies developing stem-cell products are more appropriate for a watchlist than the buy button.

Geron still has an oncology pipeline including imetelstat, which is in four phase 2 clinical trials for different types of cancer, and GRN1005, which will enter two phase 2 studies this year. Shutting down the stem-cell program and cutting about 38% of its workforce will help conserve cash to help fund those studies. Geron expects to end the year with $150 million, so it's not poor, but it's not exactly rich, either. Phase 2 trials aren't cheap.

Plus. there's always the possibility Geron could sell the program to a company with a longer time horizon and fewer cash-flow issues. Big pharma names including GlaxoSmithKline (NYSE: GSK  ) and Pfizer (NYSE: PFE  ) have dabbled in the stuff. And Teva Pharmaceuticals (Nasdaq: TEVA  ) now has a program with Australian stem-cell company Mesoblast through its purchase of Cephalon.

Though it might be a good move for Geron -- we'll know after the imetelstat studies start reading out at the end of next year -- when the name synonymous with stem cells decides they're not worth continuing development on, investors should take notice. Companies such as Cytori Therapeutics (Nasdaq: CYTX  ) , StemCells (Nasdaq: STEM  ) , and Advanced Cell Technology, which trades OTC, should remain as watchlist candidates until they've proved that their treatments work and there's demand for them.

Good thing we have a free watchlist service that we're not giving up on:

Trying to grow your portfolio through biotech multibaggers? It's not the only cutting edge industry that is changing how we live. Download the Motley Fool's special free report "The Only Stock You Need To Profit From the NEW Technology Revolution," and discover the company we see leading this disruptive movement.

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Teva Pharmaceutical Industries and Apple. Motley Fool newsletter services have recommended buying shares of Apple, GlaxoSmithKline, Pfizer, and Teva Pharmaceutical Industries and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1590053, ~/Articles/ArticleHandler.aspx, 11/24/2014 5:50:15 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement