GERON (Nasdaq: GERN) YIELDS TO REALITY

When the corporate poster child for Human Embryonic Stem Cell (hESC) research abruptly announced in November it would exit the area of research it loudly touted as having “great medical promise” and on which it seemingly staked its future, questions were sure to follow.  A rational observer of the event is likely to conclude the company, California headquartered Geron, could no longer deny they were duped by their own hype and false expectations of unattainable results.  Because their experimental research depended on the destruction of human embryos to obtain hESC’s, it was morally objectionable and widely controversial.  Nonetheless, using the argument “the ends justify the means” and drawing on an emotional response of compassion for those afflicted with untreatable diseases, Geron charged ahead undeterred. Hoping for miracle cures, celebrity personalities such as Michael Fox and Christopher Reeve enthusiastically cheered hESC research. 

When Geron quit hESC research, it was conducting Phase 1of the first-ever Food & Drug Administration (FDA) approved human clinical trial using a hESC derived therapy for spinal cord injuries.  Only four patients were enrolled in the trial.  They received injections of GRNOPC1, the name given to Geron’s hESC therapy for spinal cord injuries.  From a News Release regarding results of the trial, Geron reported, “To date, GRNOPC1 has been well tolerated with no serious adverse events.”  Although Phase1 was primarily concerned with safety, reports indicate no improvement was observed in the patients.  Then, in a subsequent News Release dated November 2011, Geron announced “the Company will discontinue further development of its stem cell programs and is seeking partners for these novel assets.”  They explained their decision in terms of “capital scarcity and uncertain economic conditions,” and an intention to focus resources elsewhere.  At the same time, they announced cutting 66 full-time positions or 38% of their work force.  However, given its current cash position, it looks to Pro Vita Advisors like Geron finally decided to cut its hESC losses because of lack of results not lack of funding.

A critical factor enabling Geron to perform illicit hESC research was its ability to convert irrational hype into funding sources. In fact, given its current cash hoard of about $150 million and revenues of less than $5 million, Geron has proven itself more skilled at obtaining financing than producing research results and marketable products. They recently raised over $100 million from a sale of common stock to the public and institutional investors.  Other funding sources include an equity investment in Geron made by Merck (NYSE: MRK), an alliance and license agreement with General Electric (NYSE: GE), and a collaboration and license agreement with Corning (NYSE: GLW). 

Geron also obtained taxpayer funding.   An Obama Care program known as the Qualifying Therapeutic Discovery Project provided a $1.2 million grant to Geron. Not to be outdone, last May California made a Targeted Clinical Development Award of $25 million to Geron from the California Institute for Regenerative Medicine.  This award, in the form of a loan, was intended to help fund “the clinical development of GRNOPC1, a cell therapy derived from human embryonic stem cells.”

In addition to hESC derived GRNOPC1, Geron’s other hESC therapy programs include GRNCM1 for heart disease, GRNIC1 for diabetes, GRNVAC2 for immunotherapy and GRNCHND1 for cartilage repair.  Hoping to salvage whatever they can, Geron announced they are seeking partners to further develop their stem cell programs, and will keep a core group of stem cell employees until mid-2012.

Advanced Cell Technology (OTCBB: ACTC) also uses hESC’s in experimental research. This company obtained FDA approval (in January 2011) for a New Drug application to treat Dry Age-Related Macular Degeneration using cells derived from hESC’s.  Similar to Geron, ACTC is on our Boycott List.