GERN Chart

What: Shares of the clinical-stage oncology company Geron Corp. (NASDAQ:GERN) shed nearly 40% of their value last month, according to data provided by S&P Global Market Intelligence. Fortunately, this drastic sell-off didn't stem from a clinical or regulatory setback for the drugmaker -- but rather it appears simply to be the result of the market's change of heart toward all biotechs, especially risky development-stage companies like Geron. 

So what: Geron is perhaps the poster child for high-risk/high-reward clinical-stage biotechs. After all, the biotech has put all of its weight behind developing a single drug following its restructuring process that started in 2011. This drug is a telomerase inhibitor called imetelstat that has the potential to be a truly disease-modifying treatment for deadly blood disorders such as myelofibrosis and myelodysplastic syndrome. As the market seemingly lost its appetite for risk altogether, though, it's not surprising this risky small-cap biotech hit the skids in January. 

Now what: Unfortunately, Geron may not be able to break out of this funk anytime soon. Going forward, the next major set of catalysts that could drive shares higher are the top-line data readouts from imetelstat's ongoing clinical trials for myelofibrosis and myelodysplastic, and these trials probably won't produce anything of note until at least the fourth-quarter of this year.

Turning to the big picture, Geron does have a rather favorable licensing deal in place with Johnson & Johnson (NYSE:JNJ) for imetelstat that could trigger milestone payments of nearly $1 billion in total -- that is, if the drug continues down the road of turning into a truly game-changing treatment for myelofibrosis and possibly other blood-based disorders as well. As Johnson & Johnson has an almost uncanny ability of spotting promising cancer drugs early in their development, I think Geron does present a compelling value proposition for seasoned biotech investors that truly understand the significant risks involved.

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.