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3 Likely Reasons Why Geron Corporation Vaulted Higher By 18% in March

By Sean Williams - Apr 7, 2016 at 9:46AM

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Is Geron's bounce temporary or the start of something much bigger?

Image source: National Cancer Institute. 

What:Shares of Geron Corporation (GERN 1.54%), a clinical-stage biopharmaceutical company focused on the development of hematology-based cancer therapies, sprung higher by 18% in March based on data from S&P Global Market Intelligence. A confluence of three factors appears to be behind the strong move higher.

So what: First, I don't think we can discount the possibility that the momentum of the market indexes played a role in March. The Nasdaq Composite, which is home to higher growth but riskier investments, surged nearly 7% for the month of March. It's possible that momentum may have pulled the valuations of numerous companies higher, including Geron.

Secondly, we're likely seeing some carryover from Geron's late February earnings release. Geron's collaboration with Johnson & Johnson (JNJ -0.89%) for lead drug imetelstat landed Geron a $35 million upfront cash payment. This payment was instrumental in allowing it to report net income of $46,000 (or breakeven per share) for the full year. By comparison, it lost $35.7 million in fiscal 2014. Although this represents a one-time payment, Geron ended the year with a healthy cash position of $146.7 million, including short-term investments, and it's snagged a very experienced development partner for imetelstat.

Image source: Johnson & Johnson.

Finally, and perhaps most importantly, Geron announced mid-month that two non-clinical abstracts containing data on imetelstat were accepted for presentation at the 2016 American Association of Cancer Research, which is to be held later this month. The presentations, which are both expected on April 19th, appear to show that imetelstat is not mediated through toll-like receptors, and that imetelstat may offer growth inhibition benefits with certain types of DNA methyltransferase inhibitors. Drug data is the highly coveted crown jewel of the clinical-stage biotech investor, and investors appear to have run with Geron's abstract release.

Now what: What really matters most for Geron investors is whether or not imetelstat can succeed in late-stage myelofibrosis and myelodysplastic syndrome studies.

Previous safety concerns in the rearview, imetelstat delivered intriguing partial and complete responses for myelofibrosis patients in early stage studies. What's notable here is that no prior clinical studies, not even Food and Drug Administration-approved Jakafi for myelofibrosis, have demonstrated partial or clinical responses. In effect, if imetelstat can find its way onto pharmacy shelves, Geron and its collaborative partner Johnson & Johnson would more than likely gobble up all of Jakafi's current revenue stream.

The risk, of course, is that Geron is very one-sided. The company is working on building out its hematology cancer offerings, but it doesn't have a clinical program beyond imetelstat. Thus, investors run the risk of being exposed to the trial outcome of a single experimental drug.

Personally, I believe it could be a risk worth taking for biotech savvy investors with a high appetite for risk. J&J has a pretty good track record of picking out winners to partner with, and if approved imetelstat could have a genuine shot at approaching or eclipsing blockbuster status. It's a name I'd suggest keeping your eye on.

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Stocks Mentioned

Geron Corporation Stock Quote
Geron Corporation
$1.32 (1.54%) $0.02
Johnson & Johnson Stock Quote
Johnson & Johnson
$173.94 (-0.89%) $-1.56

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