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The Sector King Geron Corp (NASDAQ: GERN)

GERN is developing bio pharmaceuticals for the treatment of cancer and chronic degenerative diseases including spinal cord injury, heart failure and diabetes.  (www.geron.com)

Focus: Geron develops a range of anti-cancer therapies, including anti-cancer therapies based on telomerase inhibitors and telomerase therapeutic vaccines, as well as focuses on the development of products using telomerase as a marker for cancer diagnosis, prognosis, patient monitoring, and screening.  Its products include GRN163 and GRN163L, which are telomerase inhibitors for the treatment of chronic lymph proliferative diseases, solid tumors, non-small cell-lung cancer, breast cancer, and multiple myeloma and GRNVAC1, a telomerase cancer vaccine for the treatment of acute myelogenous leukemia also developing human embryonic stem cell-based therapeutics with its spinal cord injury treatments.

  • Telomerase is a critical and potentially broadly applicable tumor target. The enzyme is expressed in a wide range of malignant tumors, and its activity is essential for the indefinite replicative capacity of cancer cells that enables their malignant cell growth. Telomerase is absent or expressed only transiently at low levels in most normal adult tissues,
  • Imetelstat is a short chain oligonucleotide that binds with high affinity and specificity to the catalytic site of telomerase, resulting in competitive inhibition of enzyme activity. Proprietary manufacturing chemistry and the addition of a 5′ lipid chain have enabled the molecule to penetrate cells and tissues throughout the body.  Imetelstat has demonstrated anti-tumor effects in a wide range of preclinical hematological and solid tumor models. Preclinical studies have also demonstrated that imetelstat can inhibit clonogenic growth of both primary patient samples and sub-populations from cell lines enriched for cancer stem cells from multiple tumor types. These sub-populations show resistance to several conventional chemotherapeutic agents. Cancer stem cells capable of clonogenic growth may play an important role in the rapid re-growth of tumors after initial reduction by standard treatments.

Market Opportunity: The American Cancer Society estimated that approximately 1.4 M new cancer cases were diagnosed in 2008.  Because telomerase is detectable in more than 30 human cancer types and in the great majority of cancer samples studied, the company asserts that telomerase-based drugs could overcome the limitations of current cancer therapies and potentially be broadly applicable and highly specific drug treatments for cancer. Congestive heart failure, a common consequence of heart muscle or valve damage, affects approximately 5.7 M people in the United States.  It is estimated that about 1.3 M people will have a heart attack, which is the primary cause of heart muscle damage. Additionally, it is estimated that there are as many as 1.2 M Americans suffering from Type 1 Diabetes (Insulin Dependent Diabetes Mellitus). Normally, certain cells in the pancreas, called the islet β cells, produce insulin which promotes the uptake of the sugar glucose by cells in the human body.  Degeneration of pancreatic islet β cells results in a lack of insulin in the bloodstream which results in diabetes. Although diabetics can be treated with daily injections of insulin, these injections enable only intermittent glucose control.  As a result, patients with diabetes suffer chronic degeneration of many organs, including the eye, kidney, nerves and blood vessels.  In some cases, patients with diabetes have been treated with islet β cell transplantation derived from cadavers.  However, poor availability of suitable sources for islet β cell transplantation and the complications of the required co-administration of immunosuppressive drugs make this approach impractical as a treatment for the growing numbers of individuals suffering from diabetes.

Regulatory Status: The FDA placed Geron’s IND for GRNOPC1, a cell therapy for neurologically complete, sub-acute spinal cord injury, on clinical hold pending the agency’s review of new nonclinical animal study data. The data showed a higher frequency of cysts, although their characteristics were similar to what was observed in previous studies: non-proliferative, confined to the injury site, smaller than the injury cavity and not associated with adverse clinical outcomes. GERN has identified new candidate markers and assays for product release that are linked with cyst formation across all animal studies in which cysts were found and is in discussions with the FDA to answer its questions in anticipation of proceeding with the clinical trial.

Financials: The Q3/09 loss was $15.2 M, or 17 cents a share with revenues of $494,000.  Operating expenses for Q3/09 were $16.9 M while R&D expenses were $13.4 M.  G&A expenses for Q3/09 were $3.5 M.  Net loss applicable to common stockholders for the first nine months of 2009 was $52.0 M, or $(0.59) per share. Revenues for the first nine months of 2009 were $1.1 M while revenues for the first nine months of 2008  included receipt of a $1.5 M milestone payment.  Total operating expenses for the first nine months of 2009 were $53 M. R&D expenses for the first nine months of 2009 were $42.3 M as a result of hiring additional personnel, increased clinical trial costs and increased production costs associated with the GRNVAC1 clinical trial in AML and initiation of the GRNOPC1 clinical trial in spinal cord injury. G&A expenses for the first nine months of 2009 were $10.7 M.

  • Shares of Geron common stock and warrants to purchase common stock were sold recently to certain institutional investors for proceeds of $3.6 M. The proceeds funded an equity contribution to ViaGen to maintain GERN’s ownership interest and were in part used to repay a $1.5 M loan extended by Geron to ViaGen.

Bottom Line: Geron hopes its embryonic stem cell experiment on spinal cord injury patients might begin in Q3/10. The original FDA approval to test the cells in patients was given in 1/09 and GERN claimed it would begin in the summer of 2009. The FDA placed a hold due to safety concerns.

  • Needham & Co has “downgraded” to a “hold” on 11/2/09 while Merriman “upgraded” on 10/09 to a “BUY”,
  • Geron Corporation’s Corporate Governance Quotient as of 11/6/09 is better than 4.9% of Russell 3000 companies and 8.6% of Pharmaceuticals, Biotechnology & Life Sciences companies,
  • Geron’s product development programs are based upon 3 patented core technologies: telomerase, human embryonic stem cells and nuclear transfer; currently owns or has licensed over 170 issued or allowed United States patents, 340 granted or accepted foreign patents and 360 patent applications that are pending around the world,
  • GERN trades at $5.33 ( 52 week range of $3. to $9.24) with a market cap of $488.37 M with 91.63 M shares outstanding,  a 89.31 M share float and a short interest ratio of 8.7%; however, the price per share has been going down for a number of months as market and regulatory issues or conditions depreciated all stem cell stocks,
  • Insiders hold 1.39% shares with 28% owned by institutions,
  • Investors include: Barclays Global Investors, Vanguard, Dimensional Fund Advisors, State Street, Herzig (P.R.) & Company, TIAA-CREF, Mazama Capital, Northern Trust,  Leuthold Weeden and Morgan Stanley,
  • Internal (regulatory initiatives) news will drive this valuation,
  • Respect the King, they will recover and soon; there is a whole lot that could be done with $178.62 M in cash!!