Geron Corporation (NASDAQ:GERN) may be a good investment on the basis of its patented drug candidate for myelofibrosis (MF). Myelofibrosis is a multi-billion dollar market with only a single symptomatic treatment available. In contrast, imetelstat, Geron's drug candidate for MF, has disease modifying potential. Therefore, if approved, imetelstat will be the only drug in the MF market that can modify the disease rather than treat its symptoms.
Geron has a long history in cancer and stem cell related research. An erstwhile stem cell company, Geron, after years of research in stem cell therapy and regenerative medicine shifted gear to target cancer stem cells.
Cancer stem cells and telomerase
Efficacy of a cancer treatment during its developmental stage is measured by its ability to reduce tumor size and improvement in survival time. Nevertheless, most drugs target only the tumor bulk, letting cancer stem cells alone, allowing cancer to relapse.
The ability of cancer cells to survive depends upon an enzyme called telomerase. Scientists who discovered telomerase in 1984 were awarded the Nobel Prize for their discovery.
Imetelstat is a telomerase inhibitor and the only drug that can pass through cells and specifically inhibit telomerase activity effectively.
In a proof-of-concept Phase II study for potential of the drug for hematologic myeloid malignancies including myelofibrosis (MF), imetelstat demonstrated stunningly improved results in patients who did not respond to conventional therapies such as hydroxyurea treatment.
Things started happening in the stock market on the Geron counter after Dr. Tefferi, M.D. of Mayo Clinic who sponsored a pilot study of the drug in MF, published an abstract saying that the study "signifies the potential value of telomerase-based treatment strategies in MF and identifies imetelstat as an active drug in that regard".
Currently there is only Incyte's (NASDAQ:INCY) Jakafi, a JAK inhibitor, available for treatment of MF. Gilead's (NASDAQ:GILD) JAK inhibitor drug is in Phase II while Sanofi's (NYSE:SNY) JAK 2 inhibitor is in Phase III. Both candidates have shown promise and if approved are expected to challenge Jakafi's domination in the MF market. JAK inhibitors however provide symptomatic relief and do not address the underlying disease unlike Geron's imetelstat.
According to the Leukemia and Lymphoma Society, MF occurs in 1.5 out of every 100,000 people in the U.S. annually. U.S. sales of Jakafi increased by 68% to $72.9 million in the quarter ended December 31, 2014. Novartis (NYSE:NVS), licensee for Jakafi outside the U.S., paid double the royalty this quarter as compared to the same quarter last year.
The market for treatment of MF is expected to grow to $1.13 billion by 2019. Being a first-in-class drug with disease modifying activity, it can be safely assumed that, if approved, Geron's imetelstat will be able to grab a major share of the market.
Besides myelofibrosis, imetelstat is being tested for two other related diseases as well. Since these, like MF, are caused by blood progenitors cells, chances are very bright of a favorable drug response in these studies as well.
Two investor concerns
Incyte has only one drug in the market and the market values it at $10.66 billion. Incyte's drug only treats disease symptoms, while imetelestat goes further and tries to modify/cure the disease. Hence, one can assume that on approval and successful launch of imetelstat, it will become a very important drug in this huge market. However, there are certain factors that investors must take into account.
In an 8-K filing, Geron disclosed that 25% of enrolled patients dropped out in an early stage trial. While this is taken as a negative -share price tanked 15% on this - the fact of the matter is that such dropouts are not an aberration. Even Incyte faced a similar situation during Jakafi trials.
However, funding trials is a matter of great concern. As of September 30, 2013, the company had $67 million in cash and cash equivalents. During 2012 the company spent $71.75 million on R&D and SG&A expenses on $2.71 million revenue. Evidently, it will be difficult for the company to continue ongoing studies without fresh funding.
Since partnerships/s may be difficult on the basis of Phase I trials, an offer to sell shares seems more viable. Moreover, Phase II data would evince more interest from potential partners.
The final word
Geron's stock could see some volatility near-term, which could actually be advantageous for smart investors. For the long haul, imetelstat sounds like a drug candidate with a lot of undeveloped potential.
Disclosure: I am long GERN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.