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It’s going to be an important week for Geron Corporation (NASDAQ:GERN). As a brief recap of what is quickly becoming perhaps the most interesting drama of 2018 in the biotech sector, GERN shares have been running higher over the past few weeks as the company approaches the decision point for whether or not Johnson and Johnson (NYSE:JNJ) will continue forward with the imetelstat development partnership with Geron.
The consequences, as we have noted, are defining for GERN shareholders: JNJ has deep pockets and can help GERN advance the drug, and GERN is in line for a major milestone payment that will be aborted if the relationship is truncated at this stage. If the relationship moves forward, GERN will likely carry far less in the way of dilution risk in the equation for bringing imetelstat to market. The outcome will also be a defining marker in determining the market’s understanding of the eventual value of imetelstat as a marketable treatment. Finally, there isn’t much else going on at Geron besides imetelstat. So, the chips are all on the table here.
Geron Corporation (NASDAQ:GERN), for a little perspective, earns a current market cap value of $1B as a biopharmaceutical company with a principal focus on becoming the first to move telomerase inhibitor treatments to market for blood cancers.
The company has a significant war chest ($19.4M) of cash and cash equivalent securities on the books according to its most recent 10-Q filing, with about $141M in additional marketable securities. That compares with about $4.9M in total current liabilities.
In addition, GERN is pulling in trailing 12-month revenues of $880K on sturdy top-line growth, with y/y quarterly revenues growing at 19.5%.
The company supports the clinical stage development of imetelstat, a telomerase inhibitor for the treatment of hematologic myeloid malignancies. It has collaboration and license agreement with Janssen Biotech, Inc. to develop and commercialize imetelstat worldwide for indications in oncology, including hematologic myeloid malignancies and other human therapeutic uses.
The company currently is running two key studies.
IMerge is a two-part clinical trial evaluating imetelstat in transfusion dependent patients with Low or Intermediate-1 risk myelodysplastic syndromes (MDS) who have relapsed after or are refractory to prior treatment with an erythropoiesis stimulating agent, or ESA. The primary efficacy endpoint is the rate of red blood cell transfusion independence lasting at least 8 weeks. Part 1 is a Phase 2, open-label, single-arm trial of imetelstat, and Part 2 is designed to be a Phase 3, randomized, controlled trial. Part 2 has not yet begun.
IMbark is a Phase 2 trial in patients with Intermediate-2 or High-Risk myelofibrosis (MF) who have relapsed after or are refractory to prior treatment with a JAK inhibitor. In March 2018, Janssen officially closed the trial to new patient enrollment. In the second quarter of 2018, Janssen initiated a protocol-specified primary analysis of IMbark, which includes an assessment of overall survival. The Company expects that following completion of the protocol-specified primary analysis, Janssen will notify Geron whether it elects to maintain the license rights and continue the development of imetelstat in any indication (the Continuation Decision). Geron expects Janssen to inform the Company of its decision by the end of the third quarter of 2018, as noted above.
Behind the Scenes
As noted above, this week is likely to frame the action in front of the all-important JNJ decision. Last week, JNJ teased the issue further by including the suggestion of a 2019-2021 potential filing with the FDA in an important drug development program update and conference call. But the company then said it was still up for grabs.
Our own perspective, as noted in our last piece focused on the game theory in play, is that JNJ management would be far less cavalier about dropping these hints if it were leaning toward cutting off the relationship.
In addition, one cannot dismiss the idea that the context for this game theory landscape is part of a negotiation going on right now behind closed doors. If JNJ were perhaps in early-stage negotiations with GERN about a possible acquisition, then proving to Geron management how important JNJ’s involvement in the development program might be a strategy in play.
In any case, it will be important for traders to avoid getting caught up in the hour-to-hour oscillations of the stock, especially in reaction to rumors and unsubstantiated stories passing for news in front of the actual announcement.
We will update the story again soon as developments transpire.