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Geron (NASDAQ:GERN) sometimes seems a house divided, with two quite different focuses to its clinical programs. One half of the company is facing the world of stem cells and the other half working in a more traditional program that is seeking to develop cancer therapies based on its knowledge of telomerase.

Telomeres are strands of DNA that are thought to control the length of cell life. With each cell division, the telomere shortens until the cell dies. In 1962, Hayflick determined that 52 was the limit on the number of times a human cell could divide before dying. In the 1980s, Elizabeth Blackburn, one of Hayflick’s colleagues, discovered the RNA-protein enzyme telomerase, which rebuilds telomeres and allows cells to continue dividing past their normal limit. In time, it was conjectured that telomerase could be a factor in the process that creates cancer, giving cells the ability to divide without dying. Ironically, Geron is seeking to develop two types of cancer drugs, one that inhibits telomerase and the other that promotes it.

Stem cells, when kept in contact with its feeder layer of mouse embryonic cells, are thought to be immortal, again because of telomerase. So the disparate halves of Geron’s research activities have an affinity after all.

Incorporated in 1990, Geron began operations in 1992. It finds itself fourteen years later with only early-stage drug candidates, a disappointment. But the company obviously has a cadre of believers because it continues to be extremely well-financed.

Telomerase-based Drugs

Geron has two telomerase-based cancer drugs in human trials, though both are early stage. For metastatic prostate cancer, the company is injecting telomerase into patients, hoping to provoke a more aggressive immune response – a therapeutic vaccine. Geron is developing this vaccine, called GRNVAC1, with Merck (NYSE:MRK).

GRNVAC1 is comprised of autologous dendritic cells that are loaded with telomerase mRNA. In the Phase I/II trial, the vaccine was well tolerated, and it caused a telomerase specific T-cell response in 19 out of the 20 patients. The drug provoked a statistically significant increase in PSA doubling time, and it cleared prostate cancer cells from the patients’ blood.

Geron’s other cancer drug, GRN163L, works the other way, inhibiting telomerase. It has been shown to be effective in treating various cancers in animals. The drug has started two Phase I clinical trials, one against chronic lymphocytic leukemia and a second for patients with solid tumor cancers, but neither one has reported results. In its preclinical studies, the drug reduced tumor growth in multiple myeloma by 30% and, when used with Velcade, cut the growth of tumors by 68%. Velcade is a Millenium [MLNM] drug that is approved for multiple myeloma. In other preclinical tests, GRN163L inhibited telomerase in many different types of cancer.

Earlier this month, Geron reported that this telomerase inhibitor [GRN163L] was effective as a radiation therapy sensitizer in breast cancer, increasing cell death by 30% over radiation alone. The data came from pre-clinical work conducted among mice. Geron says that shortening the telomerase has increased sensitivity to radiation and other agents that damage DNA. Although the drug almost completely inhibited telomerase, the effect was strong only in the case of long-term exposure to the drug.

The same drug was also effective in laboratory studies against cancer stem cells in various strains of multiple myeloma. Usually, multiple myeloma cancer stem cells are resistant to most chemotherapies.

In another telomerase-based initiative, Geron has formed TA Therapeutics Limited, a joint venture with the Hong Kong University of Science and Technology. The joint venture, based in Hong Kong, is developing a telomerase-based HIV drug currently known as TAT0002. The compound is thought to activate telomerase. Its goal is to enhance the function of key immune cells from HIV/AIDS donors. So far, the drug has been shown to increase the presence of molecules that attract other immune cells to assist in the anti-viral response.

Stem Cell Background

Geron came to the stem cell world by underwriting the ground breaking stem cell research of Dr. James Thompson at the University of Wisconsin, the work that first isolated stem cells in 1998. Technically, the patents for stem cell types is owned by the Wisconsin Alumni Research Foundations, known popularly as WARF, and sub-leased to Geron. The two entities do not charge academic researchers to build on their work, but the patents restrict academics from commercializing discoveries based on the stem cell lines Thompson isolated without paying a fee.

Because of the tremendous hope that has built up around stem cells, the limiting effect of the patents has engendered some resentment, and Geron agreed in 20XX to limit the purview of their patents to three cell types: oligodendrocytes for acute spinal cord injury, pancreatic islet cells for diabetes, and cardiomyocytes for myocardial infarction. At the same time, Geron opened up its patents that cover processing techniques to academic researchers. Once again, commercial applications would mean a fee to Geron. The limiting of Geron’s patents relieved some of the resentment, but at some point, a full-blown challenge to the WARF patents will probably be mounted.

Geron made $5.9 million on license fees in 2005, a large jump from the $1.1 million it made in the preceding year. The big bump derived from a one-time payment of $4 million that occurred when Geron transferred its animal cloning technology to a joint venture, Start Licensing, Inc.

Stem Cell Drug Initiatives

On the stem cell front, Geron is testing GRNOPC1 to treat spinal cord injuries. The drug was given to rats with injuries that prevented them from using their legs, and GRNOPC1 helped them regain control of their legs. After treatment, the injured animals exhibited remyelination of axons and enhanced axonal survival and growth. When the drug was transplanted directly onto the site of injury, it increased the number of corticospinal tract neurons by a factor of 2.5 over the control. Geron thinks the results show the drug allows new pathways for nerve conduction past the injury.

A second drug, GRNIC1, uses embryonic stem cell-derived islet clusters treatment to treat diabetes. The clusters have been generated, and they express insulin, glucagon, and somatostatin, as well as pancreative islet transcription factors. Geron plans to begin its initial human testing of the drug in 2007. In rodents, GRNIC1 produced measurable levels of human insulin the animals’ blood.

GRNCM1, the third stem cell based drug candidate, is a potential treatment for myocardial infarction. Recently, Geron released the news that it has improved its methods for producing commercial-scale amounts of the drug and that it has the appropriate cadiomyocyte transcription factors. Transplanted into infarcted rats, the cells engrafted and survived, producing robust cardiac grafts four weeks after the transplant. Human testing has not yet begun.

Financing

Early in December 2006, Geron sold 5 million shares at $8 each, a 17% discount to the open market price of the stock. It issued 75-day warrants to purchase another $15 million of stock at the same price and longer-term warrants to buy stock at a higher price.

Keeping cash is a constant activity. In 2005, Geron floated a 6 million share offering that went off at $9 per share. Merck bought another 2 million shares that raised the gross proceeds to $72 million. The offering price was an approximate 10% discount to the market price of Geron.

In the third quarter of 2006, Geron had a net loss of $9.8 million. It was $28 million in the red for the first nine months of the year, a burn rate of about $3 million per month. Revenues were $2.1 million for the nine months.

At the end of the third quarter, the company reported cash reserves of $174 million, which does not include the latest raise. Before that issuance of new stock, Geron had 66.35 million shares outstanding, giving the company a market capitalization of $592 million. Approximately 7.4% of the float is held short.

GERN 1-yr chart:

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Disclosure: Author has no position in Geron.

Source: Eye on Geron: Stem Cells and Telomerase