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Geron Falls After Scrapping Stem Cell Program

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A pioneer in the field of embryonic stem cell research is giving up on the science to focus on cancer treatments.

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In its 15 years as a publicly traded company, Geron (GERN) lost three quarters of its value. Investors who held on to the money-losing company did so for its cancer program or its leading stem cell research.

The shares are tanking Tuesday morning after the company said it's getting out of the stem cell business. The move includes shutting down one of the only human studies of embryonic stem cells to treat a medical condition (spinal cord injuries) approved by the Food and Drug Administration. The significance of this news is that there aren't a lot of commercially viable products being tested by publicly traded companies -- and now that list is even shorter.

Geron shares fell 21% to $1.74 in morning trading Tuesday.

CEO John Scarlett says he hopes to sell the stem cell program. But who's buying? Besides being controversial, embryonic stem cell research has generated little interest among public pharmaceutical and biotech companies. With Geron ending its clinical trial, the only other company conducting FDA-approved human studies of embryonic stem cell treatment is Advanced Cell Technology (ACTC), a penny-stock company with a $200 million market cap. The company's stock is down more than 40% this year, trading at 11 cents a share Tuesday. (See Advanced Cell Technology Gets Third Ever FDA Approval on Stem Cell Studies.)

Scarlett told analysts on a conference call Tuesday that he sees "potential promise" in stem cell research but the move to exit the program allows Geron to refocus its company on cancer. Geron has two cancer drug candidates in the middle stages of human testing. Scarlett says the company needed to stop funding stem cell R&D to be able to develop those treatments.

By licensing its stem cell research to another company, it may be able to transfer the clinical program that it's shutting down, Geron execs say. Therefore, another company could pick up the studies as long as the FDA gives the nod.

One problem: Geron execs couldn't say whether the stem cell research for spinal cord damage actually worked. The initial study's goal, they say, was to test to determine whether the treatment is safe for patients. The treatment may be safe but is it effective? The Geron folks say they don't know.

It will be interesting to see if anyone actually picks up Geron's program and whether it fetches much of a price.

Some larger companies have kicked the tires on stem cells but the focus has been on the adult variety. Now part of Teva Pharmaceuticals (TEVA), Cephalon took a stake in an Australian stem cell company late last year. (See Cephalon's Huge Stem Cell Wager.) That deal seemed to spark interest in stem cells again -- adult stem cells.


Twitter: @brettchase

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No positions in stocks mentioned.
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