Can Geron Recover in 2012?

With 2012 just beginning, now's a great time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Geron (Nasdaq: GERN  ) . The small biotech took it on the chin in 2011, losing more than 70% of its value as it wrestled with controversy about its stem-cell research program. But now that the company has made a huge strategic decision to move away from stem cells, the big question is whether the company can retain investor interest long enough to work through its pipeline of drugs. Below, I'll take a closer look at what people expect from Geron and its rivals.

Forecasts on Geron

Median Target Stock Price $6
2011 EPS Estimate ($0.73)
2012 EPS Estimate ($0.65)
Expected Annual Earnings Growth, Next 5 Years 5%
CAPS Rating (out of 5) ***

Sources: Yahoo! Finance and S&P Capital IQ.

Will Geron bounce back in 2012?
Analysts certainly have very high hopes for Geron, with a price target that's quadruple what the shares currently go for. Yet they also realistically peg Geron's potential as a long-term play, projecting losses through 2012. Members of our Motley Fool CAPS community are neutral about the stock, giving it a mid-range three-star rating.

The big move that Geron made in 2011 was to give up its stem-cell research. By doing so, Geron hopes to avoid any further damage from controversies over stem cells. Along with Geron, Cytori Therapeutics (Nasdaq: CYTX  ) and Aastrom Biosciences (Nasdaq: ASTM  ) have also seen big volatility in their shares, as advances in stem-cell research seem inevitably to give way to concerns about whether the companies are viable investments.

In addition to getting out of a controversial area, Geron will also save millions in research costs, as it expects to cut almost 40% of its workforce as a result of the move. Moreover, if the company is able to sell its stem-cell division to another buyer, it could bring in extra cash, which would be useful for clinical trials going forward. With their own stem-cell programs, Pfizer (NYSE: PFE  ) or GlaxoSmithKline (NYSE: GSK  ) could find the old Geron program a useful addition.

Geron has a number of drugs remaining in its pipeline after the move. Imetelstat is currently involved in four phase 2 clinical trials for various types of cancer. But both imetelstat and fellow cancer drug GRN1005 aren't expected to show results until late this year at the earliest. That means investors will have to wait awhile just to see if the drugs have enough promise to proceed to phase 3 trials. In the meantime, you should expect volatility from Geron shares anytime the company announces even the smallest bit of news.

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Click here to add Geron to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. Motley Fool newsletter services have recommended buying shares of GlaxoSmithKline and Pfizer. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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  • Report this Comment On January 20, 2012, at 12:27 PM, Regenerative101 wrote:

    Geron's focus on "embryonic" stem cells was a strategic error - the technical challenges and costs are just too great at this time, whereas companies utilizing "adult stem cells", such as Cytori Therapeutics, have generally shown impressive results (especially in the areas of wound care and ischemic conditions where stem and regenerative cells from adipose tissue appear to be very effective). Geron made the right decision by pulling out of the embryonic mess - investors can make the right decision by focusing on autologous stem cell therapy, which is fast becoming an accepted procedure for addressing a wide range of conditions where there is no other effective treatment.

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