The following is part of our week-long Rule Breaker series, where we Foolishly examine several companies and ask, "Is it a Rule Breaker?" Hey, even better, we'll answer the question for you.

A better starting question might be: How can Geron (NASDAQ:GERN) not be a Rule Breaker? Rule Breakers are No. 1, top-dog companies in important emerging industries.

Geron is the leader in embryonic stem cell research. If we want to talk about disruptive technologies that could topple conventional drugs, this would be it. Geron is not playing the big pharma game of developing small-molecule drugs that simply treat symptoms. It is developing cell-based therapies that are potential cures.

A company targeting outright cures rather than superficial treatments sounds very much like a Rule Breaker to me. With such lofty potential, is it possible that Geron doesn't make the grade?

The pipeline
Geron is best known for its leadership position in human embryonic stem cell research. Embryonic stem cells are the source of every other cell type in the body. Because of that innate characteristic, stem cells may be able to be coaxed into transforming into cell types that could be very useful for treating diseases.

The target markets for stem cell therapies are traumatic injuries and certain diseases that permanently destroy crucial cells. A few examples are the severing of nerves from spinal cord injury, degeneration of neurons in Parkinson's disease, and the death of heart muscle cells from heart attacks. In all of these cases, traditional drugs are of almost no use.

What is needed is a completely new paradigm in drug development -- a new way of attacking old problems. With its leadership position in developing stem cells as therapies, Geron is at the forefront of this change. We call many companies in that position Rule Breakers.

While stem cells give Geron its sex appeal -- at least in a geeky, scientific sort of way -- the company is not just a stem cell company. It has a very active research program around an important enzyme called telomerase. Telomerase allows cells to indefinitely divide. Normal, healthy cells don't make telomerase, but cancer cells do, which is one reason they grow and multiply like crazy.

Targeting telomerase to treat cancer is Geron's most advanced drug program, and the company is going after telomerase with a two-pronged attack. Right now it has a telomerase cancer vaccine (TVAX) in phase 1-2 clinical trials for the treatment of prostate cancer. The aim of this drug is to convince the immune system to target cancer cells, using telomerase as an indicator, while ignoring everything else.

The second way Geron is going after telomerase is directly inhibiting the enzyme with a drug. It is expected to start a phase 1 clinical trial of its telomerase inhibitor, GRN163L, this year.

Good science, bad stock
Geron's science is hot. Its stock is not. Here's a sobering fact: Geron completed its IPO on July 30, 1996, at $8 per share. Today, almost nine years later, Geron shares are trading near $6. That's a lousy performance.

Want another nasty number? According to its 2004 10-K, Geron has accumulated net losses of $336 million since it began operations in 1990. Having sunk a ton of money into R&D, the company has had absolutely zero payoff to shareholders who have been along for the ride.

As bad as those figures are, what's past is largely irrelevant. Investor returns in the future will depend on what happens with the company and its drug programs. Looking out on the five-year horizon, do we have reason to believe that the stock's trend will change? Can we predict when the company's R&D will reward shareholders?

A pre-Breaker?
The answer to both of those questions is no. Despite its interesting, exciting, and potentially earth-shaking science, I cannot call Geron a Rule Breaker. I might call it a pre-Breaker, or a Breaker in the making, but it's not quite there yet.

Am I perfectly willing to change that opinion in the future? Absolutely. For that to happen, though, I'll need to see phase 2 data from one of the company's drug programs showing that the technology works. There is a big difference between having potential and being a sure thing. If I could spin straw into gold, I could turn the heavy-metals industry on its head and make mining obsolete. I would be a Rule Breaker. However, the odds of that happening are zero.

While stem cells have the potential to change the drug world, I'm not yet convinced this will happen in the near future. There have been a lot of promising technologies in biotech that have failed to deliver, despite the hype (antisense and cancer vaccines, to name two). Will stem cells fall into that category, or will they work? We just don't know.

Investing in science projects is not the same as investing in marketable products. For nearly a decade, Geron has been an academic research lab masquerading as a publicly traded drug company.

Unfortunately, I'm not a benevolent philanthropist. Nor do I have the power of the National Institutes of Health to dole out grants in support of academic research. I'm an investor, and I want to put up money for drugs that have clear payoffs. Despite phenomenal potential, Geron's drug programs have an extremely high chance of never working out, and current investors can get strung along for years following the story.

That may or may not change. Until it does, Geron is not a Rule Breaker.

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Motley Fool Rule Breakers biotech analyst Charly Travers does not own shares of any company mentioned in this article. The Motley Fool has a disclosure policy.