Geron: The Best Buy In The Market

Sep. 2.14 | About: Geron Corporation (GERN)

Summary

Geron has the largest potential upside of any stock I follow.

Recent patient information suggests substantial efficacy in MF and now a third MPN disease after ET, MDS-RARS.

Acquiring the Mayo Clinic's data and IND is a critical step to move the company forward.

Many positive catalysts could occur at any time. Sitting on sidelines risks missing those events.

For many Geron (NASDAQ:GERN) followers, the story is well known: Target telomerase and inhibit the enzyme that cancer cells require to multiply, and watch the cancer fade away. The drug that does just that, GERN's Imetelstat, has had some very exciting results. The drug is succeeding against multiple, challenging cancers by sending patients into remission, something never done before in these myeloproliferative disorders.

Some History

Now a little blurb about my background, I'm not a Bio analyst or a forensic accountant scrutinizing COGS and margins. I was a floor specialist, market maker of NASDAQ stocks and ran a fairly large trading desk over my 25 years in the industry. This experience has taught me to look for special situations where fear or greed has unbalanced the market. While those events are harder and harder to find, we now have such a situation with GERN. I rarely push my ideas forward into articles, however with GERN there is now such a large disconnect between the huge potential and low price that this opportunity warrants an article.

For a quick reminder and as most know, the company presented terrific results at the 2013 European Hematology Association Congress where in their Essential Thrombocythemia ET study the results were extraordinary with "100% hematologic response rate in the updated data set, accompanied by a molecular response rate of 88%." This was followed up at the American Society of Hematology ASH 2013 conference, where for the first time in this disease, five patients (out of 22) went into remission. Three of the five went into complete remission, meaning the fibrosis in the marrow cleared, blood cleared and blood counts reverted to normal. It was as if these patients were getting the benefits of stem cell replacements but in a much faster time-frame, and without the life-threatening risks. It was also the first time in this disease that a drug produced partial responses PRs and complete responses CRs. Over 20% of patients went into remission and an additional 20%+ of patients saw significant Clinical Improvement (NYSE:CI), thus a 40%+ total response. After the results from ET and MF studies last year, the company's stock quadrupled from about $1.50 in September to nearly $6 in December. The FDA's hold in March sent the stock tumbling and has created a wonderful buying opportunity.

Many investors, make that most investors, originally thought the FDA's hold was meant to stop the new MF trial from proceeding, when in fact the hold was directed solely at the company's ET study. Importantly, MF, while related to ET, is much more life threatening and has unmet medical needs (advanced MF patients have life expectancies [LEs] of just 1.3 years compared to those with ET, who can live 20 years or more). The risk/reward of the drug profile is completely different in these two diseases and a major reason I believe the FDA will allow GERN to proceed in MF.

As most are aware, the Mayo Clinic's IND was also temporarily placed on a partial hold, not because there was anything wrong, but simply because Geron's ET trial had shown slightly elevated but persistent LFTs (mind you, these levels were similar to what you get after drinking a martini or two, and these elevated levels have no clinical significance that I could find). Ironically, the hold was a blessing in disguise for investors as we learned two important things.

  1. The Mayo's IND hold was quickly removed by the FDA and thus confirms there was no adverse toxicity, and/or the risk/reward of Imetelstat is now shown to tilt substantially towards the favorable side.
  2. Of the 45 patients in the study prior to the hold, 33 (a larger number than any analyst predicted) remained in the study as of the end of July. Since the FDA asked Dr. Tefferi to remove all patients that were not "deriving clinical benefit", this indicates 33 patients are now deriving significant clinical benefit and would need to be either in remission, or nearly in remission, in order to continue in the trial- especially considering the conservative actions the Mayo Clinic would require with a drug on partial hold.

New Information

Consider the following: These 33 patients with MF (23) AML (1) and MDS RARS (9) have very short life expectancies (LEs). The MF patients were at the Intermediate+/Advanced stage and therefore very sick with LEs approximately 1-2 years. The AML patient has a five month LE (or less) and while we don't have specifics on the MDS patients, we know that all nine remain in the study. All these patients were enrolled prior to Jan 2014, some as early as the beginning of 2013. Not only have 33/79 patients probably gone into remission or very nearly so, but they have also kept their responses, thus demonstrating the drug's extended durability - some well over a year! If you watch this video of Dr. Snyder, at 21:50 he says "ALL patients that weren't CR or PR have been taken of the study." While Dr. Snyder is not running the Mayo IST, this is fairly exciting detective work that shows we have 33 remissions in the Mayo trial. And even if he misspoke, there certainly are a number of remissions accompanied by strong CIs. After watching Dr. Snyder's presentation I firmly believe we will get confirmation of these facts at ASH in early December, and this event could cause price eruption (pun intended).

We have strong, yet anecdotal evidence that the drug works. The price of Geron has languished in the $2.25-2.50 range even though a check of their financials shows roughly $0.90 cents per share of cash (no debt) and a market value of about $370 Million. It appears that many investors and analysts are waiting on the sidelines as GERN gathers the requested FDA data on ET patients. In order to get released from their hold, the company must track the LFTs to baseline, and because the patients had been on Imetelstat for years, this could easily take another 3-6 months to get complete data.

The number one concern for investors is that while it appears the drug works, and works wonders against MF (and other MPN diseases), Geron can't legally move forward with a multi-center PHII trials while its IND is on hold by the FDA. So, until they collect this data and report back to the FDA, their hold prevents the company from taking a step forward. Up until August 4th there was no other option for GERN other than to wait for their LFT data to be collected, then submit it in a package to the FDA.

On August 5th GERN made the critical announcement that they were taking over control of the Mayo Clinic's authorization to run trials IND and their independent study IST, and all the data that comes with it. There are three very important points here.

  1. GERN is now able to access ALL of the data from the Mayo Clinic's study, something they didn't have before and is critical to fine tune their MF study. This will allow detailed analysis of dosages, blood counts, LFT data, response time, etc.
  2. The Mayo Clinic's IND has NO hold on it and would therefore provide a path (a legal path) for new trials to take place.
  3. The leader of the Mayo Clinic's Myelofibrosis IST, world-renowned Dr. Tefferi, "will remain the principal investigator for the study." Tefferi's desire to stay on as principal investigator also speaks volumes about the drug's potential success.

GERN has already received data from the IST and "The company plans to use the transferred data and information from the Myelofibrosis IST to inform the design of Geron's planned Phase 2 clinical trial in MF". Having the complete data set, as well as data going forward will dramatically help GERN understand their drug and inform them for the new Phase II trials. It would also seem logical that this move was not just to collect data (something that could have been done in a simple agreement), but also to allow Geron a path forward in order to initiate their PHII MF trials as soon as 1Q 2015, which continues to be CEO Chip Scarlet's planned timeframe.

One other news item worthy of consideration is the recent August 25th paper from a working group which was "comprised of members from European LeukemiaNet (NYSE:ELN) and International Working Group for MPN Research and Treatment (IWG-MRT)." Important endpoints for new drugs treating MPNs were discussed for Phase II and III trials. "A time-to-event, such as overall survival, or progression-free survival or both, as co-primary endpoints, should measure efficacy in phase III studies. New drugs should be tested for preventing disease progression in MF patients with early disease in randomized studies, and a time to event, like progression-free or event-free survival should be the primary endpoint." This in essence means the group wants drugs that affect the MPN diseases and extend survival rates, and so far it looks like Imetelstat is the only drug to do so.

Path Forward

Here is specific wording that is also very important and not fully understood by the market or investors. According to the last GERN press release, "Geron has committed to the U.S. Food and Drug Administration (FDA) that the company will not initiate any new clinical studies under the transferred IND from Mayo Clinic until Geron has had further communication with the FDA regarding the company's IND and development plans for Imetelstat." It does not say the FDA must "approve" the new trial; all it says is that Geron will "communicate" with the FDA. The foremost goal for GERN is to start their new multi-center trials, and at the end of September they will have the means to do so. The company needs a CLEAN IND in order to start a new trial in MF, and this newly acquired IND will give them the legal means to move forward into MF. That is by far the company's top priority.

Catalysts

There are a number of potential positive catalysts that may occur at any time during the next six months, and sitting on the sidelines risks missing these events.

  1. Transfer of IND could be complete before Sept 30
  2. GERN could apply for Phase II through new IND in Oct
  3. FDA could grant partial or full release anytime
  4. MDS RARS publication or presentation could occur anytime
  5. ASH abstracts are released early Nov
  6. ASH presentation in early Dec
  7. Possible partnerships announced
  8. Other papers on Imetelstat expected at ASH
  9. Potential BTD

The transfer of the Mayo Clinic's IND should go through and Geron will present a package to the FDA (1. requested animal studies 2. most recent LFT data on the ET patients 3. Efficacy data on the MF patients and the planned PHII multi-center study). While the FDA may or may not grant a partial release of the Geron IND hold, it won't matter as the company can proceed into MF studies under Mayo's IND. The ASH 2014 abstracts will be announced in early November, then there could be excellent, if not blockbuster, data presented at ASH in December. Last year's ASH data sent the stock to $7-8 and this year's data might easily surpass that due to potentially better responses, extended durability, and possibly extended LEs, so I will let the reader determine where the price could go. If Geron eventually gets BTD for their drug, I find it realistic that we may see the stock price in double digits as that would mean the FDA has verified that the efficacy is a noticeable improvement over all competitors. Recall, Imetelstat has been shown to be the only drug to induce remissions in MF.

Risks

Obviously there are risks associated with this biotech stock. The company has one drug, and that drug is on full clinical hold which might not be released. We haven't seen much in terms of adverse effects, but the reader should go back over the presentations and look at past SAEs. Those looking for a quick move might not get any news until ASH, and if that is the case this might be two month of dead/waiting money. The company has cash in the bank, but probably needs more money or a partner to complete Phase III trials.

Remission

While there are risks with every stock, the drug's potential efficacy should allay concerns. We glossed over the previous ET and MDS data, but recall all 18/18 had responses in ET and it currently appears we have all 9 MDS RARS patients getting significant benefit- if not remission. This drug may be 3 for 3 in the Myloproliferative diseases: possibly curing cancer where there currently is no hope. Investors recall that prior to Imetelstat, nobody had ever seen partial or complete remissions in Myelofibrosis. With respect to the AML patient who was infused sometime before Jan 2014 and probably had a LE of five months or less. That he/she remains in the study now is astounding.

Lack of competition

With respect to competition, the only real option is Jakafi produced by Incyte, which according to their financials has a market cap of around $9 Billion. Jakafi is FDA approved and has helped shrink the spleen in MF patients, but according to research, "does nothing to modify the disease (of MF)" and its use has never resulted in a CR or PR. Hydroxurea is another option, but again, doesn't affect the disease, it just helps symptoms.

From my research and in speaking to patients and friends with MF and having conversations with their doctors, both patients and doctors want access to Imetelstat and would certainly want the drug as their first option- if available. This seems to be more critical information not yet absorbed by the market. It would be interesting to see an analyst do a direct comparison between INCY and GERN and a comparison of the side effects and efficacy of their two main drugs, Jakafi and Imetelstat.

Fundamentally driven value assessments are difficult to determine in biotech drugs, especially with drugs not yet FDA approved, so I will leave the fundamental analysis to another writer. We don't know if Imetelstat will be approved or not and if so, for how many diseases? However, it does appear that GERN's drug is working on a number of myeloproliferative disorders and sending patients into remission. My opinion is that the FDA will certainly value remissions over manageable side-effects, and they will move this drug forward.

Potential Home Run

One final point regarding a true possibility- Breakthrough Therapy Designation (BTD), which is the gold standard for fast FDA approvals. The following bullet points are from the FDA website.

  • intended alone or in combination with one or more other drugs to treat a serious or life threatening disease or condition and
  • preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

This appears to describe Imetelstat. Regarding the second bullet point, the FDA site later offers a suggestion of what substantial improvement might be, specifically it states if a drug offers CRs when other drugs have only recorded PRs, that might prove sufficient. In the case of Imetelstat, it has demonstrated both PRs and CRs and no other drug has ever demonstrated either response in MF. More from their site... "If a drug is designated as breakthrough therapy, FDA will expedite the development and review of such drug. All requests for breakthrough therapy designation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request." This BTD (if granted) might be the best news yet to come for GERN.

It isn't often you get a chance to buy a potential cancer cure at such a cheap price. Yes there is still substantial risk as Imetelstat is GERN's only drug, but the reward seems so improbably high and the results seem that they will be so improbably good. These catalysts appear on the horizon, it's just a matter of when they occur. Those investors who sit on the sidelines and wait might miss out by waking up to a much higher stock price. We simply don't know exactly when news will hit, but it seems highly improbable that the FDA won't allow a life-saving drug to get to market.

Investors were confused by the FDA's action, but we now have a better opportunity to buy a company and its drug. Imetelstat appears to be working effectively on numerous cancers and it has been suggested that it might also work in very challenging cancers such as pancreatic cancer and other cancers with active telomerase. I like investing in a drug that saves lives and I love the potential of this drug. Last year a few analysts had $10 price targets on Geron, even before we had evidence of the MF success. How many potential upgrades are possibly awaiting? There are 25 Million shorts- just substantial fuel for the fire. I remember that my father bought Amgen for my college account when I was younger and the $2,000 investment turned quickly in $40,000. This reminds me of that investment and potential. As always, do your own due-diligence.

Disclosure: The author is long GERN.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is my largest holding. I plan on buying more on any drop and/or along with any significant news.