What happened

Shares of the clinical-stage biotech Geron (NASDAQ:GERN) are up by 10.4% as of 9:46 a.m EDT. The spark?

Geron's shares are jumping this morning on the news that the Food and Drug Administration granted the company's sole drug candidate, imetelstat, Fast Track designation as a potential treatment for patients with intermediate-2 or high-risk myelofibrosis (MF) whose disease has relapsed after or is refractory to janus kinase (JAK) inhibitor treatment or relapsed/refractory MF.

A chalkboard bar graph illustrating a negative trend turning positive.

Image Source: Getty Images.

So what

After Johnson & Johnson (NYSE:JNJ) returned imetelstat's global rights to Geron last year, it appeared as though the drug's MF indication was essentially a no-go. However, the FDA's unexpected decision to grant the drug Fast Track status today arguably suggests otherwise. As imetelstat's commercial opportunity in MF was estimated to be no less than $500 million before J&J left the building, it's easy to see why investors are bidding up Geron's stock today on this key regulatory development.

Now what

Geron plans on holding an end-of-Phase 2 meeting with the FDA early next year to discuss a potential regulatory pathway for imetelstat in advanced MF. Whether the agency would be open to an accelerated approval is anyone's guess. At a minimum, though, the FDA at least seems to think that imetelstat's midstage data was encouraging enough to warrant this coveted regulatory designation.

Should investors take a flier on this high-risk biotech? As things stand right now, Geron is most likely a few more years from transforming into a commercial-stage entity. Meanwhile, the company will still have to contend with the costs associated with imetelstat's late-stage development as a treatment for lower-risk myelodysplastic syndromes. That fact implies that more dilution is probably on the way. So it might be best to take a wait-and-see approach with this high-risk, high-reward biotech for now.

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