$GERN Geron Corporation: The Clock Is Ticking G

$GERN Geron Corporation: The Clock Is Ticking

Geron Corporation (NASDAQ: GERN) reached an unfortunate milestone last month. Namely, the company's short interest hit an all-time high at the end of March, with over 44 million shares now being sold short.

Why is Wall Street so deeply pessimistic about this small-cap biotech stock? I think, if the truth is told, that Wall Street isn't actually betting against Geron's long-term prospects, but rather, short-sellers realize that they still have a few more months to profit on this name in a fairly safe manner. While this trend may annoy longs, I believe patience will ultimately pay off for shareholders. Here's why.



The writing is on the wall
As a reminder, Geron is developing the telomerase inhibitor imetelstat through a licensing deal with Johnson & Johnson's (NYSE: JNJ) pharmaceutical wing known as Janssen. The drug is currently in mid-stage trials dubbed IMbark and Imerge for the bone marrow disorders myelofibrosis (MF) and myelodyspastic syndromes (MDS), respectively. Per the latest update, J&J is expected to make a call on the fate of this collaboration by the end of Q3 of this year.

Now, turning to the point of this article, I think J&J has essentially green-lit imetelstat's further development, and the market is quietly becoming aware of this fact. During J&J's Q1 conference call, for example, as Executive Vice President and Chief Financial Officer Dominic Caruso noted, "The pipeline is very strong with -- we're now eight more products we intend to file between now and 2020, each having a billion-dollar potential."

The key takeaway here is that is Caruso is including imetelstat in this elite group of experimental drugs. Imetelstat, after all, was recently listed as J&J's top New Molecular Entity (NME) in oncology on April 17 and there are exactly eight NME candidates highlighted across J&J's oncology and neuroscience pipeline progress report.

However, Caruso's affirmation and J&J's pipeline update arguably went unnoticed by the market last week. Geron's stock barely reacted to the news. But savvy investors may want to take note.

Imetelstat's risk is overstated
Why is this list of selected NME pipeline highlights so telling in regards to J&J and Janssen's plans for imetelstat? Two reasons.

First off, imetelstat's ongoing trials have been continually vetted by the Joint Steering Committee, as well as the Food and Drug Administration (FDA). And as I mentioned before, these are not double-blinded trials, and patients with MDS and MF do not spontaneously reverse course in terms of disease progression. Therefore, J&J definitely knows where these data are headed in the broad sense. If imetelstat was missing the mark, after all, J&J simply wouldn't be wasting time and money by continuing these studies.

Secondly, investors need to understand another key point about Janssen's pipeline: It's absolutely massive. At present, J&J's pharma subsidiary has 170 ongoing clinical trials, according to clinicaltrials.gov -- only two of which pertain to imetelstat. The point is that J&J decided to earmark imetelstat as a top prospect -- even though it literally has dozens upon dozens of other promising drug candidates. That's a sure sign of confidence, in my book.

https://finance.yahoo.com/news/geron-corporat...00847.html

George Budwell, The Motley Fool
Motley FoolApril 23, 2018