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Why Geron Corporation's Stock Is Getting Hammered Today

By George Budwell – Updated Sep 27, 2018 at 7:35AM

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Geron doesn't get the answer it was hoping for from Johnson & Johnson.

What happened

Geron's (GERN 2.19%) shares fell by more than 65% in pre-market trading this morning on heavy volume. The biotech's shares are cratering in response to a negative continuation decision by Johnson & Johnson (JNJ 1.01%) regarding the duo's blood cancer collaboration for the telomerase inhibitor imetelstat.

According to the press release, J&J has decided to return the rights to Geron due to "strategic portfolio evaluation and prioritization of assets within their portfolio." The drug's rights will effectively transition over to Geron on Sept. 28, 2018. 

Man with a laptop over his head holding a sign that reads HELP!

Image source: Getty Images.

So what

Geron's stock was up by more than 200% from its 52-week lows at one point last week, thanks to the belief that J&J would take imetelstat into late-stage testing and perhaps buy its collaborator outright. Obviously, this termination decision dashes that thesis, forcing Geron to pick up the pieces and rebuild its infrastructure to develop imetelstat alone. 

Now what

On the plus side, Geron said it does plan on advancing imetelstat into a late-stage trial to evaluate the drug in patients with low or intermediate-1 risk myelodysplastic syndromes who have relapsed after or are refractory to prior treatment with an erythropoiesis stimulating agent. That process is expected to get underway by mid-2019.

Unfortunately, Geron reportedly decided to not raise additional capital while it had the chance to do so when its share price was north of $6. The direct consequence of this action is that Geron is eventually going to have to raise more funds at depressed share price levels to sally forth with imetelstat's development. That being said, there may be one or more other names out there willing to pick up the baton. Imetelstat, after all, is now ready for phase 3. Stay tuned.

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.

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