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Geron Stock: Buy, Sell, or Hold?

George Budwell, The Motley Fool

Like a lot of Geron's (NASDAQ: GERN) remaining shareholders, I've been contemplating whether this stock is worth holding onto following its dramatic collapse last month. As a recap, Geron's shares cratered after Johnson & Johnson (NYSE: JNJ) decided to terminate its nearly four-year collaboration with the company for the experimental blood cancer drug imetelstat.

As a long-term-oriented investor, my initial inclination is to hold for the duration. Clinical-stage biotech stocks can mount miraculous comebacks seemingly out the blue, after all. And there are a handful of reasons to think that Geron could bounce back. With this theme in mind, let's take a deeper look at what's on tap for the company. 

Paper fortune teller with the four sections labeled BUY, SELL, HOLD, and $

Image source: Getty Images.

Incoming catalysts

While investors seemed to focus solely on the news that J&J was breaking up with Geron, the company did provide some material news about imetelstat's ongoing development in this last press release. Namely, the company noted that J&J's biotech wing, Janssen, submitted abstracts for both of the drug's midstage trials in relapsed and refractory myelofibrosis and myelodysplastic syndromes for the upcoming American Society of Hematology (ASH) meeting. The meeting is being held in San Diego from Dec. 1 to 4.  

Although the company wasn't sure if these abstracts would be accepted at the time, Geron should have received word from ASH organizers regarding this matter by now. As such, investors will definitely want to be on the lookout for a press release about these pivotal clinical updates in the next week or so. 

Why are these abstracts so important? Well, the fact of the matter is that Geron still hasn't released much in the way of details from either of these studies. These ASH presentations, if they take place, should therefore provide crucial details about imetelstat's clinical profile in both myelofibrosis and myelodysplastic syndromes. In turn, Geron's stock will almost certainly react to these critical clinical updates in a big way. 

What's Geron's longer-term outlook?

This all-important question is going to depend heavily on imetelstat's more nuanced data readout in myelodysplastic syndromes slated for early 2019. The key issue is that Geron arguably doesn't have the money to both carry out imetelstat's planned late-stage trial and subsequently build a sales force to undertake the drug's commercial launch.

Late-stage oncology trials, after all, can easily cost upwards of $120 million to $140 million to complete (including administrative costs). That amount would drain Geron's coffers, forcing the company to either raise capital at depressed share price levels or seek debt financing on unfavorable terms. 

Partnering is thus an essential next step for the company. However, partners will want to see a viable path to market for imetelstat before signing on the dotted line. The mature myelodysplastic syndromes data, therefore, need to be fairly compelling to spark licensing talks. Otherwise, Geron will have to undertake imetelstat's late-stage development from a cash-restricted position, and that's far from optimal for shareholders.

Put simply, Geron is perhaps two and half years away from filing for imetelstat's regulatory approval in myelodysplastic syndromes, assuming financing isn't a major hurdle. If a cash crunch occurs, though, there's no telling how long this process may take or even if Geron will be able to cross the finish line in a go-it-alone scenario. That's why the company absolutely needs to come up with some form of external licensing revenue within the next six months -- at least from the perspective of this particular shareholder.    

What's the verdict?

Personally, I plan on waiting for the ASH data to come out (if they do) before making a call on whether to buy more, sell out, or hold my remaining shares for the long term. If the data aren't compelling, after all, I still have time to sell this position for tax-loss purposes this year. That said, I'm cautiously optimistic that Geron's unwavering confidence in this drug will be borne out by the data -- at least for its myelodysplastic syndromes indication. That might be wishful thinking, but far stranger outcomes do happen in biotech all the time.

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George Budwell owns shares of Geron and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and has the following options: short October 2018 $135 calls on Johnson & Johnson. The Motley Fool has a disclosure policy.