What: Shares of Geron (GERN -0.56%), a clinical-stage biopharmaceutical company currently developing an experimental drug known as imetelstat to fight hematologic myeloid malignancies, rocketed 25% higher in March, based on data from S&P Capital IQ, after receiving a substantial price target hike from one Wall Street firm, and following the release of its fourth-quarter earnings results.
So what: In early March, Geron reported a fourth-quarter loss of $8.9 million, or $0.06 per share, which actually narrowed from its $9.3 million, or $0.07 per share, loss reported in Q4 2013. More importantly, it ended the year with $170.6 million in cash and cash equivalents, which includes a $35 million upfront payment from collaborative partner Johnson & Johnson (JNJ -1.15%), removing any doubts about near-term cash concerns. Additionally, Geron announced a restructuring that will result in its workforce going from 39 to 21 positions, resulting in $1.9 million in restructuring charges, but ultimately $5 million in personnel savings annually moving forward.
More importantly, Wall Street firm MLV & Co. substantially raised its one-year price target on Geron from $4.25 to $6 while reiterating its "buy" rating on the company. With imetelstat now removed from clinical hold and the drug licensed in collaboration with Johnson & Johnson, MLV & Co. believes imetelstat could one day surpass Incyte's Jakafi as the standard of care treatment for myelofibrosis.
Source: Geron.
Now what: The question that investors need to ask themselves here is whether or not Geron's huge run higher, predominantly on the heels of MLV & Co.'s price target hike, is warranted.
On one hand the data imetelstat has supplied in prior clinical studies is extremely encouraging for myelofibrosis patients. Instead of relying on JAK inhibitors such as Jakafi which are only geared at reducing symptoms of the disease, imetelstat is the first clinical drug to actually demonstrate partial or complete responses in any form for myelofibrosis patients. Of course, we'll need to see how imetelstat does in larger studies, and we'll want to pay attention to its safety profile very closely considering its prior clinical hold.
Johnson & Johnson obviously sees something special in imetelstat, otherwise it wouldn't have given Geron an opportunity to earn up to $935 million in development, regulatory, and sales milestones. Still, with just a single drug in its pipeline, investors are potentially playing with fire by betting on Geron. I personally believe the smart move is to wait for additional clinical data on imetelstat for myelofibrosis in a larger trial before you consider buying Geron stock.
