Geron Corporation Stock Forecast: Much of the work being done to combat disabling and deadly disease happens in the biotech sector. A long list of companies are tackling conditions like HIV, Multiple Sclerosis (MS), diabetes, and cancer.
In some cases, pharmaceutical scientists look for new ways to leverage existing therapies in the battle against disease. In other cases, they explore a variety of natural and synthetic ingredients to design new, more effective therapies.
In either case, progress is slow, and failure rates are high. New drugs are vetted through an extensive series of clinical trials before the US Food and Drug Administration (FDA) approves them for use. It is common for promising treatments to fail during the trial process – sometimes on the final step. Such setbacks can be devastating to the companies that invested in research and development.
Of course, a certain number of drugs do make it through screening, improving existing treatments and occasionally offering breakthrough solutions for complex conditions. Successful new drugs give patients better quality of life, and once in a while they even provide a cure.
Biotech companies rely on investors to fund research and development, and investors are willing to buy in for the chance to be a part of a breakthrough treatment.
On the rare occasion that a new or improved therapy comes to market, it can mean billions in revenue. For example, Abbvie’s Humira generated $19.9 billion and Merck’s Keytruda generated $7.1 billion in revenue for 2018. These drugs treat certain autoimmune diseases and 11 types of cancer, respectively.
Clearly, there is profit to be made for companies who succeed in developing next-generation therapies – and for those who invest in them. The question for investors is which of the many biotechs is most likely to succeed? Many analysts are starting to believe that Geron Corporation is a contender.
What Does Geron Corporation Do?
Geron Corporation [NASDAQ: GERN] is hyper-focused on improving cancer treatments.
It’s primary area of research is around inhibiting telomerase. The telomerase enzyme generally has no impact on most normal cells in the human body – the primary exception being the reproductive cells.
However, telomerase is active in 90 percent of cancer cells. Essentially, the enzyme prevents cancer cells from dying, so they are able to grow and multiply unchecked.
This behavior makes the telomerase enzyme a prime target for new cancer-fighting therapies, under the theory that inhibiting telomerase could change how cancer cells survive and reproduce.
So far, drugs targeting telomerase have been unsuccessful – not because they didn’t work, but because the side effects were unacceptable.
Geron Corporation [NASDAQ: GERN] is currently in Stage 2 and Stage 3 trials of a first-in-class telomerase inhibitor called imetelstat.
Early results from a Stage 2 trial show promise for treatment of lower risk myelodysplastic syndromes (MDS), a condition marked by abnormalities in the blood forming cells in bone marrow.
Another Stage 2/Stage 3 trial has returned favorable results for the treatment of Intermediate-2 or High-risk myelofibrosis – another form of bone marrow cancer. While imetelstat is still years away from the market, it could be a blockbuster if and when it is finally approved for patient use.
Is Geron Corporation a Buy?
As soon as Geron Corporation [NASDAQ: GERN] announced that it was initiating a Stage III clinical trial for imetelstat, share prices shot up. In the first six months of 2019, the total gain was 41 percent.
Investors were immediately ready to back what could be a breakthrough cancer treatment, in hopes that they will eventually be rewarded with a piece of the possible hundreds of millions in revenue that imetelstat could generate. Considering that Geron’s current market cap is under $300 million, the profit potential is astronomical.
Of course, the potential for profit comes with substantial risk.
The first and most pressing is getting to the approval stage at all. While Stage III trials give cause to be optimistic, plenty of drugs fail at this point in testing. In many cases, the drug is withdrawn due to the side effects it creates during human use – an issue that has plagued previous attempts to develop telomerase inhibitors.
The application is in, and the agency has promised a decision by April 2020. In a best case scenario, Genron’s drug won’t come to market until the end of 2022 or the beginning of 2023, at which point it will have to compete with luspatercept for market share.
Finally, investors face a third risk. Genron still has a substantial amount of work to do if it is to bring imetelstat to market – and that work is going to be very expensive.
At this time, Genron simply doesn’t have enough cash to cover the costs it will incur in coming years. That means the company will have to raise money, which will dilute existing shares. Investors who buy now should go in under the assumption that such a move is coming relatively soon.
Geron Corporation Stock Forecast: The Bottom Line
The bottom line is that investing in biotech stock is notoriously risky. Even well-established companies with full pipelines see significant volatility in stock prices as successes and failures are reported.
Geron Corporation [NASDAQ: GERN] has a single candidate in its pipeline, and if this drug fails, the company could very well collapse alongside it.
On the other hand, that single candidate is in the late stages of clinical trials, which dramatically increases the likelihood of long-term success. With Genron stock prices so low and the upside potential so high, this may be one biotech that is well-worth the risk.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.