Ahead of a make-or-break decision on imetelstat from collaboration partner Johnson & Johnson (NYSE:JNJ), shares in Geron Corp. (NASDAQ:GERN) have soared 90.6% through the first six months of 2018, according to S&P Global Market Intelligence.
J&J licensed rights to imetelstat for hematologic myeloid malignancies, including myelofibrosis, in 2014, and while imetelstat holds promise as the first disease-modifying drug for this indication, there's been considerable doubt about its future.
Previously, J&J abandoned a low-dose arm of imetelstat after interim early-stage data proved to be disappointing. Also, questions about efficacy have dogged imetelstat following trial data showing that it might not reduce spleen volume by as much as Jakafi does, the standard of care. As a refresher, a reduction in spleen volume was the primary endpoint in trials enabling Jakafi's approval.
J&J's license allows it to walk away from imetelstat following phase 2 and the above concerns had many industry watchers debating if it would exercise that option. However, there's growing optimism it may be willing to pursue phase 3 trials.
Earlier this year, J&J approved an extension study to track and record data from patients already treated with imetelstat. Conceivably, J&J wouldn't have done that if it had already decided to abandon imetelstat. Also, J&J listed imetelstat as a potential top-seller in its pipeline during an investor presentation earlier this year, adding conviction to the thinking that it will continue developing it.
Given Geron Corp's sub-$2 share price late last year and declining pessimism, it's easy to understand why shares have rallied significantly in 2018.
There's an undeniable need for new myelofibrosis treatments, and since Jakafi's annual sales exceed $1.5 billion, there's reason to think an eventual success that could support FDA approval would be a big win for Geron. About 75% of patients discontinue Jakafi within five years because of side effects, and the life expectancy for patients discontinuing treatment is just 14 months.
If J&J continues development of imetelstat, then Geron can exercise co-commercialize rights. If so, it would pay 20% of future development costs, but it would collect a $65 million milestone payment and it could collect up to $820 million in additional development, regulatory, and sales-based milestones. If approved, it would collect royalties in the high teens to low 20% range, too.
A decision against co-commercializing imetelstat would still pay off for Geron, though. In that scenario, it can collect a $135 million payment and up to $765 million in development, regulatory, and sales milestones. If approved, it would get low-double-digit to mid-double-digit percentage royalties.
Alternatively, a decision by J&J to walk away would be a big blow. Developing imetelstat on its own would be costly and convincing another partner that J&J was wrong to abandon it could be tough.
Overall, investors are betting on a positive outcome, but there's no guarantee of that happening, and for that reason, Geron is best left to aggressive investors able to withstand the heavy price of disappointment.