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Geron Drops as Drug Failure Marks Latest Stumble

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The company ends research for a cancer treatment and plans to cut 40% of employees. CEO Scarlett tells investors he has faith in another cancer medicine, imetelstat.

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MINYANVILLE ORIGINAL A dozen years ago, Geron (NASDAQ:GERN) traded at a peak $68 per share. The company was viewed as a star in the emerging science of testing stem cell therapies to treat things like spinal cord injuries.

Geron, which scrapped its stem cell business a year ago to focuses on cancer treatments, traded down 28% to $1.07 Tuesday morning after the company's latest stumble. Geron is slashing its 107-person workforce by 40% after deciding to dump its program studying a brain cancer treatment. Geron will discontinue research of the drug GRN1005, and will focus its efforts on another cancer therapy, imetelstat.

The company was started in 1990 and went public in 1996. It lost money every year and had an accumulated loss of about $786 million at the end of 2011. When it announced its intentions to exit the stem cell business last year, shares fell. The stock took another huge tumble in September after it was disclosed that imetelstat failed in studies of the drug as a breast cancer treatment.

So why stick with Geron? The company's executives say imetelstat may treat other types of cancer.

"We see imetelstat as a really core potential product for the company," Geron CEO John Scarlett told investors on a conference call Tuesday morning. "I personally remain enthusiastic about prospects" for the drug, the CEO adds.

Imetelstat research focuses on a couple of blood cancers and the drug's effect on tumors in lung cancer patients. Updated data for a mid-stage study of the drug treating a blood disease, essential thrombocythemia, will be presented next week at the American Society of Hematology in Atlanta.

In addition to cutting jobs and a research program, the company is replacing its chief financial officer. Company treasurer Olivia Bloom takes over for Graham Cooper. Geron also brings on a senior vice president for corporate development, Craig C. Parker, who was most recently with Human Genome Sciences. The cost-cutting effort aims to cut annual expenses to $33 million next year from about $65 million this year. Geron says it will have about $90 million in cash and investments at the end of this year.

Sale of the company's stem cell intellectual property and other assets won't help much in terms of raising cash. After announcing in November of last year that it would scrap the program, Geron said last month that it intends to sell the stem cell assets to BioTime (NYSEAMEX:BTX), a company headed by Geron founder Michael West.

Hundred of millions of dollars worth of research went into the stem cell program. It's sale price: $5 million in cash, $30 million in BioTime stock and warrants for additional shares under a convoluted structure proposed by the two companies. The cash and stock would go into an acquisition subsidiary set up by BioTime that would be jointly owned by the companies and a private investor. The shares of BioTime are down 40% this year, trading at $3.55 each Tuesday.

Twitter: @brettchase

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No positions in stocks mentioned.
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