The news relayed on November 7th, regarding the investigator-sponsored study run by Geron Corporation (GERN) for Imetelstat in Myelofibrosis (MF), gave the stock a jumpstart. The premarket rise following the news was a whopping 93%, with a midday gain of 72%. The trend however, was hampered following the earnings release for the third quarter after market close, with revenues falling almost 56% short of estimates.
Geron's abstract for their myelofibrosis treatment drug, Imetelstat, was posted on the American Society of Hematology (ASH) website prior to the presentation of the same on December 9th by Dr. Ayalew Tefferi of the Mayo Clinic. Imetelstat is being studied as a treatment of myelofibrosis, a condition in which abnormal cells build up in the bone marrow, which causes the formation of thick scar tissue that hampers the production of healthy blood cells. The studies suggest that patients (n=18) treated by Imetelstat experienced remission or had a reversal of the fibrosis, with an overall 44% response rate.
Imetelstat is indeed a high potential drug, since it targets the underlying cause of the disease and just might be able to cure it. Currently, an approved drug for myelofibrosis in the market - Incyte's Jakafi - provides symptomatic relief and improves overall survival. The drugs in development for myelofibrosis, Cell Therapeutics' momelotinib and Gilead Sciences' simtuzumab, may face a major competition as Imetelstat has more potential than JAK2 inhibitors. However, the results of the Imetelstat study are based on a small sample and don't provide clinical symptomatic relief according to the abstract, and needs further studies to prove its worth. This is one of the reasons that I believe that valuations of Incyte will not be affected by this news in the short run.
On the upside, if it reaches the market it has the potential to garner a large market share and bring in large amounts of profits to the company.
The company has cash and equivalents of $66.21 million as on September 30th, and estimates the cash to be enough for the next twelve months with the existing operations. However, once the company initiates phase II trials of Imetelstat, it will require increased funding and may use up its resources quicker than they expect, leading to the need for financing. Currently, the company has not given any estimated costs for the phase II trials. I believe the recent run will encourage the company to go for equity financing and will in turn result in share price decline.
The news of the abstract may have boosted the shares and created a positive sentiment for the company, but it is not substantial enough to provide a breakthrough for Geron, not until the presentation at ASH. The study no matter how much attractive, still has to be evaluated for its ability to sustain what it claims, over an extended period. However, the drug has the potential to gain blockbuster status, given its proposed ability to target the underlying cause of the disease.
Additionally, another reason to tread cautiously regarding this stock is the recent divestiture of the company's embryonic stem cell assets. The company was pioneer in developing embryonic stem cell therapies; however they discontinued the program last year owing to the complexities regarding manufacturing, costs and regulations.
The presentation at the ASH next month will provide a better picture regarding the potential of the drug. In my opinion, the prudent decision at the moment would be to hold the stock until the presentation at ASH. If the drug has definite potential then the stock prices will surge and continue to do so with news regarding the drug and its studies. However, the drug has a long way to go before it actually hits the market, i.e. if future studies support the mid-stage trial results and provides clinical benefit. Investors who got in early have made a lot of money but I will not recommend new investors to go in at these levels. It will be a more prudent approach to wait for the ASH next month. The presentation will be a mega catalyst for Geron and it is advisable that long-term investors take some profits before the event to safeguard themselves against any adverse news.
On the downside the results might be misleading or exaggerated, or may not prove to be positive in the future studies; since at the moment only the abstract has been made available, with no other details. Additionally, the company may require secondary offering to generate funding for its trials, which will negatively impact the share prices.