Geron Corporation (GERN)
The Rhythm is $GERN ah Get You
Geron Corporation (GERN) is a SMALL-CAP company founded in 1990 and began public trading on the Nasdaq in June 1996. In their own words from Geron’s Investor’s page;
“Geron is a late-stage biopharmaceutical company with a mission to extend and enhance the lives of patients living with hematologic malignancies. Our first-in-class telomerase inhibitor, imetelstat, has demonstrated strong evidence of disease modification in Phase 2 trials.” [https://ir.geron.com/home/default.aspx]
Phil’s Take:
For a casual investor with no medical knowledge like me, biomedical stocks have always been enticing investment opportunities. There is plenty of financial upside if you can identify the right late-stage company and have the patience to wait through the incredibly long Federal Drug Administration (FDA) approval process. To get around my lack of medical knowledge when researching, I ask myself the same basic screening questions:
Are they doing something new/unique (usually called first-in-class in the medical world)?
Are they in Phase 3 of clinical trials?
Are they announcing positive progress with their clinical trials?
Do they have a commercial launch planned in the next year?
If the answer is “yes”, then the stock has my attention, and it is worth taking a longer look at the fundamentals. GERN checks all four boxes.
GERN’s primary product in development, Imetelstat is a first-in-class product currently in two Phase 3 clinical trials. It is a novel drug with a unique profile designed to target blood cancers, a disease category with a growing number of patients. In the last month GERN has announced progress in both of their Phase 3 trials. They have begun presenting and publishing results from their IMerge trial and announced 50% enrollment in their Phase 3 IMpactMf trial. Imetelstat has been submitted for approval in both the US and Europe, with both agencies expected to give their approval in 2024. The FDA has a PDUFA date (shorthand for a first approximation of when a final decision on drug approval can be expected) of June 16th, 2024. Europe’s potential decision date is less concrete, but the company expects the review to be completed by the end of 2024. With those dates in mind GERN is ramping up production in anticipation of a mid-2024 U.S. commercial launch. They upped their employees in Q3 and plan on doing the same in Q4.
On the numbers side there is plenty to like. Over the last two years they have been able to beat consensus earnings expectations (5 of the last 8 quarters) and have been able to keep their negative quarterly earnings within a range of -.10 to -.07. They project that they have access to enough financial resources to sustain operations through Q3 of 2025 despite the increases in expenses coming from their commercial launch preparations. Their debt-to-equity ratio (0.18x) isn’t alarming. For those people who are fans of companies with strong management teams, GERN should satisfy them as well. The CEO has been with the company since 2011 and they have assembled a group of executive vice presidents with experience in other oncology drugs and major pharmaceutical companies like Janssen, now Johnson & Johnson Innovative Medicine (JNJ). In short, there is plenty of success sitting on the Board.
Traditionally biomed companies see a stock increase after FDA approval. The size of that increase largely depends on how much the market has already priced in the approval. Larger gains are based on long-term profitability, no guarantee even after regulatory approval. GERN is currently engaging in the kind of ramp up you expect from a company transitioning from R&D to product manufacturing and the market appears to be pricing in anticipated success already.
GERN had been holding steady in the $2 range since October but good news about their clinical trials and optimism about the Fed’s approach to interest rates in 2024 saw the stock jump around 13% in the last week of trading. Trading volume is also up. The big question I am asking is what the new floor is. Two weeks ago, I would have said GERN shouldn’t dip below $1.85, now I am wondering if the new floor isn’t $2.05. With all this end of year market optimism, I am waiting a little longer to see if prices stabilize. I like the price now and would love anything sub $2.15. Anything but a massive surprise from their Q4 report on March 14 or a setback in their regulatory approval process should allow GERN to steadily build gains as they announce progress towards their anticipated commercial launch. Ultimately, I view GERN as a long hold.
Clint’s Take:
I like GERN. You know how much I enjoy long tenured steady leadership (hope my wife is reading). GERN’s roadmap from the FDA approval to ramp up for commercial release looks solid. Its price movement from the Year to Date (YTD -10.74%) to today has corresponded with that trajectory. Blood cancer accounts for 6% (approx. 1.6mm cases) of all cancer diagnoses annually worldwide, with a five-year survivability rate of only 25-35% in adults. It is always the double-edged sword of biomed investing, but there is a demand for Imetelstat. Another factor in biomed for me is where they are approval-wise. It only takes one adverse reaction to derail the train, which usually causes a stock price crater, before it gets back on track following an investigation. GERN appears to have made it to the “ten-yard line” without any setbacks, and research suggests (medical publications, not financial) that not only have practitioners taken a “peek” at the findings, but the last leg of this run should go smoothly.
Moving Forward:
I always enjoy it when Clint is willing to say he agrees with me, and we are both watching this one closely. Since we have a consensus, it will go into the “Checking My Math” watchlist. It has been at its most volatile price point since October but continues to announce good news, giving some credit to the movement. Hopefully, it can find its new floor sometime in the next few weeks. Until then I have my mouse hovering over the buy button for this one.
02/16/24
“On January 30, 2024, the FDA provided notice in the Federal Register that it has scheduled an advisory committee meeting of the Oncologic Drugs Advisory Committee as part of the NDA review, to be held virtually on March 14, 2024, from 9:30 a.m. to 3:00 p.m. Eastern Time. The meeting will be open to the public. For additional information, please see https://federalregister.gov/d/2024-01797
When we spotlighted GERN on December 21st 2023 I wrote that “It has been at its most volatile price point since October but continues to announce good news, giving some credit to the movement. Hopefully, it can find its new floor sometime in the next few weeks.” Well it has been more than a month and it looks like GERN is still perfectly happy with its $1.80 floor. Volatility continues to be an issue with the price graph for the last month looking like a very enjoyable rollercoaster. With Q4 earnings still a month away (March 14th) I expect more of the same pattern. The fundamentals of the company make GERN’s long term position attractive to investors like me but the volatility will also attract short term traders. News about the FDA meeting makes March 14th a big day for GERN. I’ll update again in March to talk about what I’m looking for from that all important date but for now my original position remains unchanged.
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