Last year, Geron's (NASDAQ:GERN) stock ripped higher in anticipation of Johnson & Johnson's (NYSE:JNJ) continuation decision revolving around the duo's experimental blood cancer drug imetelstat. However, the biotech's shares promptly gave back all of these annual gains -- and then some -- when J&J decided that imetelstat didn't fit into its long-term plans. 

Geron's epic fall late last year, though, might turn out to be a once-in-a-lifetime opportunity for patient investors. The hematology-oncology space, after all, is one of the most highly valued and fastest-growing areas in all of healthcare. Moreover, J&J reportedly didn't base its decision on imetelstat's clinical performance, but rather on a strategic portfolio review.

Close-up image of human blood.

Image Source: Getty Images.

This beaten-down biotech stock could thus turn out to be a hidden gem in the event that imetelstat's upcoming late-stage program is a success. Let's dig deeper to consider if risk-tolerant investors should take a flier on this penny biotech stock right now. 

Background and outlook

For those new to this story, J&J was evaluating imetelstat in two mid-stage trials for the blood disorders known as relapsed/refractory myelofibrosis and lower risk myelodysplastic syndromes, respectively. Following Geron's presentations at last year's American Society of Hematology meeting, we learned the following about these two studies: In patients with advanced myelofibrosis who have stopped responding or never responded to treatment with Incyte's Jakafi, imetelstat failed to reduce spleen volumes in a manner that would clearly indicate a strong therapeutic benefit in this patient group as a whole. 

That said, patients in this trial did yield an encouraging trend in terms of median overall survival, compared to those from other studies. Therefore, imetelstat might still have an important role to play in the treatment of patients no longer eligible for Incyte's front-line therapy. 

Unfortunately, Geron will probably need a partner to pursue this high-value indication. A pivotal study with overall survival as its primary endpoint could easily take three to four years to complete. And that kind of extensive development timeline is well beyond Geron's reach from a financial standpoint right now. 

Imetelstat's prospects in lower-risk myelodysplastic syndromes, however, appear to be much brighter. In short, the drug's midstage trial results for this second indication prompted Geron to move forward with a late-stage trial scheduled to get underway in mid-2019. If this next study is a success, imetelstat's commercial opportunity could be as high as $1.5 billion

Can Geron deliver a million-dollar payday?

With imetelstat's advanced myelofibrosis indication in question, investors should probably focus solely on the drug's prospects in myelodysplastic syndromes for the time being. But that's not all sunshine and unicorns, either. Acceleron Pharma and Celgene's luspatercept is likely to gain a first-mover advantage for this indication, which could cut deeply into imetelstat's peak sales opportunity.  

Even so, Geron's stock could still produce some astonishing returns on capital. For example, an investment of $10,000 at current levels has the potential to appreciate into something along the lines of $25,000 to $28,0000 in the next few years -- even if imetelstat ends up only grabbing 12% to 15% of the myelodysplastic syndromes market and Geron's stock garners at least an average premium. 

Bottom line: Although this penny biotech stock may not be one of the rare gems that can easily transform a small amount of capital into a million-dollar payday, there's arguably enough upside potential here to warrant a serious look by aggressive investors who are comfortable with heavy doses of risk.