What happened

Geron Corporation (NASDAQ:GERN), a small-cap clinical-stage biotech, saw its shares rise by as much as 33.8% in early-morning trading today. Although its stock has cooled off somewhat in the interim, Geron's shares are still up by a healthy 14.8% as of 1:48 p.m. EDT Thursday. 

The apparent reason for this continued surge is an all-out exodus by short-sellers. As proof, Geron's stock is up on a monstrous 15 times the average daily volume today. 

A person walking their index and middle finger up a stack of coins.

Image Source: Getty Images.

So what

This purported short squeeze is likely being driven by two factors:

  1. Johnson & Johnson (NYSE:JNJ) and Geron's blood cancer collaboration for the telomerase inhibitor, imetelstat, is potentially producing unprecedented clinical benefits for patients with both advanced myelofibrosis and myelodyspastic syndromes.   
  2. Geron's stock crossed over the pivotal $5 mark today. By doing so, the biotech's stock is now marginable, and a larger swath of institutional investors can buy its shares. 

Taken together, these two factors should be enough to make short-sellers rethink their position. 

Now what

Previously, J&J has suggested that it may apply for a regulatory approval for imetelstat in advanced myelofibrosis before year's end. The good news is that imetelstat's overall survival curve for this unmet medical need seems to warrant an accelerated approval -- even without an active comparator arm or a placebo-controlled trial.

The fact of the matter is that myelofibrosis patients have no viable treatment options, and imetelstat appears to be extending their lifespans in a clinically meaningful way. 

What does this all mean? My guess is that Geron's stock will continue to tick higher in the months ahead until imetelstat's top-line data are released. If positive -- and the trend is favorable -- I think Geron can easily reach $20 a share. However, this stock remains a high-risk growth play, and investors shouldn't risk more than they are willing to lose. 

 

George Budwell owns shares of Geron. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.