What happened

Shares of the clinical-stage biotech Geron Corporation (NASDAQ:GERN) were nosediving yet again on Friday following Johnson & Johnson's (NYSE:JNJ) decision on Thursday to terminate its blood cancer partnership with the biotech. Specifically, Geron's shares dropped by as much as 22% in early morning trading on more than double the average daily volume.  

The main reason behind this latest plunge seems to be the lack of clarity regarding Geron's future after its conference call with investors on Thursday. The company said that it plans to advance imetelstat into a pivotal stage trial by mid-2019 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. But investors apparently aren't convinced that this is a viable pathway forward. 

Paper boat sinking into a black liquid.

Image Source: Getty Images.

So what

Geron, for reasons unknown, decided to halt its fundraising earlier this year. That could prove to be a serious misstep. Although Geron reported having $183 million in cash and marketable securities at the end of August, the company arguably needs upward of $500 million to complete imetelstat's late-stage development and initial commercial launch.

So, without a new partner, there's no guarantee that Geron can successfully execute on its promise to continue imetelstat's development -- at least not without seriously damaging current shareholder value via repeated rounds of secondary offerings at depressed share-price levels. 

Now what

The bottom line is that Geron either needs to find a new partner to carry the torch, or it will have to raise a significant amount of capital over the next two years by diluting shareholders. Unfortunately, imetelstat failed to produce truly convincing results in either of its mid-stage trials, which is probably the underlying reason J&J ended the partnership.

In other words, the company might have trouble locating another partner willing to pick up imetelstat -- at least based on the data released thus far. That's not to say imetelstat is doomed, but the company certainly has its work cut out for it moving forward. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.