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The decision was made to conserve cash and resources on development on its cancer drugs.

GERN has 2 cancer therapies in or beginning the 2nd of 3 trials generally required for FDA approval. One treatment, called Imetelstat, is being tested in non-small cell lung cancer, breast cancer, the blood disorder thrombocythemia and multiple myeloma. The other, GRN1005, is being tested against brain metastases stemming from non-small cell lung cancer as well as from breast cancer.

GERN will cut 66 full-time jobs, or 38% of its workforce, and take cash charge of $5M in Q4/11 and $3M in the first half of FY12. GERN will end 2011 with $150M in cash and it had a net loss of about $65M in the first nine months of the year, according to its most recent quarterly report. Shares of GERN have dropped about 23.18% in trading, to $1.69, so far Tuesday.

Geron said that its move did not reflect a lack of promise for the controversial field. Rather, it said, with money scarce, it had decided to focus on its experimental cancer therapies, which are further along in development.

Still, the move is expected to be widely seen as a setback for embryonic versus adult stem cell research, because of GERN’s central and early role. There will be a lot of concern GERN’s exit, and speculation will create fits, rebounds and share price depreciation -- for a while -- for the stem cell universe. But it has cast a pall over existing research field. A specific issue that is still paramount: managing and controlling the cells, as well as the manufacturing capability.

I believe the FDA bears some responsibility in that it has inhibited research invoking “holds” and trial approvals. (I could have used another title -- “FDA Kills Human Embryonic Stem Cell Research” -- invoking The Buggles' 1979 hit "Video Killed the Radio Star." It celebrates the golden days of radio, describing a singer whose career is cut short by television.)

The biggest credibility hit could be taken by the California Institute of Regenerative Medicine, which was supposed to provide matching funds to help GERN finance clinical trials of its experimental stem cell therapies. Yet another factor is the new CEO, John Scarlett, who was brought in at the end of September to replace longtime CEO Tom Okarma, who had to make some tough decisions.

At the end of the day, as enticing as the upside could have been, it was also impractical to carry cell therapy and cancer research programs. One has to wonder about Advanced Cell Technology (ACTC.OB) as the only stem cell company conducting active clinical trials on human embryonic stem cell-based products. That’s not to say that all stem cell research is toast; work continues in embryonic stem cells and “adult” stem cells treatments forged from cells that already have differentiated into specific functions, like heart muscle, as well as induced pluripotent stem cells, adult stem cells returned to an embryonic-like state and manipulated in the lab to form specific cells.

So how many other business plans are about to change and evolve?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.