Miami, FL – October 10, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Geron Corporation (NASDAQ: GERN).
In a recent press release, Geron Corporation (NASDAQ: GERN)disclosed that it has ceased their partnership agreement with Johnson & Johnson (NYSE: JNJ)subsidiary, Janssen Biotech Inc. for the exclusive worldwide license and collaboration on Geron’s leading oncology drug candidate called Imetelstat. The drug is in its early phase of clinical development, and currently being evaluated for two hematological cancers namely Myelofibrosis (MF) and Myelodysplastic Syndrome (MDS).
The main question among investors is why Janssen decided not to continue with the partnership. After all, Imetelstat’s prospects don’t seem that bad, considering the clinical trials for Imetelstat were encouraging. A closer look at the company’s disclosure reveals that Janssen Biotech is abandoning the Geron collaboration to focus on other drug assets in their pipeline that has greater chances of commercialization. Given the uncertainties surrounding the prospects of their lead drug, investors were distraught and indiscriminately sent Geron shares to a 5-year low.
Does Geron Have Enough Ammunition to Take Imetelstat to Commercialization?
Following the termination of the Janssen agreement, Geron will regain global rights to develop and commercialize Imetelstat, without financial obligations to Janssen. The catch, however, is that Geron will have to break out on its own and without the benefit of JNJ’s wide distribution channel and considerable war chest.
Imetelstat’s target markets are promising – implying that there is a high probability to successfully bring the drug to market. A recent industry study shows that the Global Myelofibrosis treatment marketis anticipated to increase to $971.5 million in 2024 or a compounded annual growth rate of 6.78% from 2018 to 2024. On the other hand, the Global Myelodysplastic Syndrome is a $2.2 billion marketand poised to grow at a compounded annual growth rate of 12.7% from 2017 to 2025.
Per management, the Phase 3 clinical study is expected to commence in mid-2019. Based on its latest 10-Q filings, Geron’s cash reserves of $160 million will enable the company to cover these clinical studies and probably two years’ worth of annual operating expenses.
However, even if Imetelstat looks promising post clinical studies, Geron would still need to raise additional cash to finance their sales and distribution efforts. Without meaningful cash flows, the company will likely undertake a follow-on share offering, resulting in massive dilution among existing shareholders.
Investors understand that the company’s value is attached to the successful commercialization and distribution of their lead drug in the market. With no product available in the market for Geron, the company would likely experience accumulated cash burn until the commercialization of their lead drug.
If management performs, there is a massive upside in Geron’s stock. Assuming the company will be able to capture at least 10% of the expected $6 billion markets, sales are projected to reach $600 million, or net profit of $180 million on an estimated 30% net profit margin. At conservative 10x P/E multiple, shares could be worth $9.83 per share, albeit lack of immediate catalysts.
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