Geron Corporation (NASDAQ:GERN), an upstart blood cancer specialist collaborating with Johnson & Johnson (NYSE:JNJ) for its first-in-class telomerase inhibitor imetelstat, saw its shares gain a whopping 28.7% last Friday on roughly 10 times the average daily volume. The biotech's September call options also went absolutely bonkers, indicating that the market clearly expects Geron's stock to take flight within the next four weeks of trading.
What kicked off this pronounced rally? Geron's shares shot up in response to a job posting by J&J's biotech wing Janssen for a Europe, Middle East, and Africa strategic pricing manager that specifically named imetelstat six times in the description of the position's duties. Although J&J later downplayed the ad by stating that the "job posting does not have anything to do with its licensing deal with Geron," according to a report by Bloomberg, investors apparently weren't buying this denial based on the stock's strong finish last Friday.
Should investors take this job posting as a definitive sign that Geron's stock is now de-risked, or is this ad a nonevent, as J&J stated? Let's take a look to find out.
What's known and unknown
The skeptics were quick to point out that a job posting is a far cry from a positive continuation decision. That's certainly fair. For what it's worth, the ad does mention both Imbruvica and imetelstat. Therefore, J&J's follow-up statement that the position is simply "consistent" with the company's blood cancer portfolio is certainly plausible. In that case, this job posting is essentially a nonevent.
Then again, the posting is rather detailed in terms of the job's key responsibilities. If we take the ad at face value, for instance, J&J seems to already have a plan to launch imetelstat as a treatment for low-risk myelodysplastic syndromes (MDS) and induction-ineligible acute myeloid leukemia (AML) in Europe far sooner than anyone predicted. That scenario would be a major win for Geron's shareholders, thereby justifying last Friday's double-digit rally.
Unfortunately, there is no way to know whether J&J is being forthright about the purpose of this job posting or if someone let the cat out of the bag. However, it is quite odd that this ad even saw the light of day at this crucial juncture. After all, J&J is only weeks away from announcing its continuation decision regarding imetelstat, and the drug's midstage trial data underscoring this decision has likely been vetted by now. J&J, therefore, had to at least suspect that this job posting would turn out to be a market-moving event for Geron's stock.
Even so, the only solid takeaway here seems to be that imetelstat remains in J&J's plans with the clock winding down. That doesn't mean that a positive continuation decision is a slam dunk, but the chances do appear to be climbing.
Has Geron's stock been de-risked?
The blunt answer to this question is no. Geron is still a high-risk speculative biotech play, and investors certainly shouldn't shrug off this fact based on a simple job posting. That being said, short-sellers should also probably think twice before taking a position at this stage. After all, Geron's stock could double or triple in value in the next few weeks if this curious job posting turns out to be a harbinger of things to come.
George Budwell owns shares of Geron and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and has the following options: short October 2018 $135 calls on Johnson & Johnson. The Motley Fool has a disclosure policy.