Bittersweet to see Geron ($GERN) drop their embryonic stem cell (ESC) program. On one hand, the science is pretty cool and much has been learned with $GERN leading the way. But, on the other, the bar for safety and efficacy is quite high for any biotech company to tackle independently. For better or worse, this currently leaves Advanced Cell Technology ($ACTC), a bulletin board company, as the only publicly-traded embryonic stem cell-based company in the game. [Recall that there are many different types of stem cells (I wrote about companies developing one type of stem cell, neural stem cells, previously), but human embryonic stem cells are truly pluripotent (able to continue dividing and become any cell in the body).]

You can learn more about $GERN’s decision to drop their hESC (human ESC) program, and read some opinions from these articles: Bloomberg, Forbes, theStreet.com, and from the Washington Post.

$GERN has spent hundreds of millions of investor dollars developing hESCs for therapeutic applications, and investors have happily handed over their capital to push stem cell research forward on a hope and dream. A wonderful dream, but a dream nonetheless, that will require more research, as well as selective targets and indications. In this regard, $ACTC may have selected a better target for their retinal pigment epithelial (RPE) cell-derived line for back of the eye diseases, such as macular degeneration.

hESC development has met and overcome numerous challenges over the years, from government funding challenges to FDA safety requirements, but with $GERN now exiting the field, who or what else will help push ESC therapies forward? We already know that it is costly from both a financial and time perspective – has it been more expensive than small molecule development? Given the risks, how long can/will any new investors wait before their investment can be harvested? Will we be looking towards Asia (Singapore, China) or Europe for breakthroughs, or can the public/private sector here in the US, tackle this dilemma?

Geron has 131.5 MM shares outstanding (10/24/11) and after a 23% correction on the stem cell news, the share price (intra-day, 11/15/11) is down to $1.69/share, giving them a market cap of c. $222 MM. They reported $180 MM cash in the bank (3Q11), and expect to end the year with $150 MM cash. As management shuts down the hESC program, they will be ramping up Phase II trials for GRN1005, so burn will likely not drop. If we assume a $80 MM burn rate (using OpEx guestimate as surrogate; $20 MM G&A + $60 MM R&D) going forward, $GERN is comfortable through YE12, roughly one-year’s cash. At this point, we should have a fair idea if our two candidates have legs, or if additional creativity will be needed to keep the company afloat. This is what we should expect over the next 12-18 months:

Adapted from $GERN 3Q 10-Q;
* ClinicalTrials.gov
^ Multiple Myeloma
# Essential Thrombocytopenia

(Sorry, haven’t yet learned how to create/copy over a table yet)

The oncology programs are interesting, but I have not yet studied the existing data for both imetelstat and GRN1005, so I don’t yet have an opinion. Suffice it to say, that these are exploratory studies targeting a new pathway, so there are “unknown, unknowns” to reckon with for this analysis. To their credit, the ongoing imetelstat-telomerase Phase II trials appear to have control arms, so we should be able to get a handle on the data sets late next year.

I wonder what the odds are for $GERN to become the next $ONXX – if the data are good, of course.

If memory serves, they were spun out of Chiron in the early 90s. In their 1st 10-K filing (1997), their lead program was another novel therapeutic hypothesis: adenovirus-based gene therapy (ONXX-015/CI-1042) for treating cancer. But, by 2002-2003 they underwent a business realignment to develop BAY 43-9006, which we know today as Nexavar (sorafenib).

It is far too early to place bets on imetelsat as the next Nexavar, but this hope and dream may be able to deliver faster and cheaper than the hESCs. We will see.