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Geron's Stock Plunges as J&J Ends Imetelstat Collaboration

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Geron Corporation (GERN - Free Report) suffered a major setback as it announced that Janssen, a subsidiary of Johnson & Johnson (JNJ - Free Report) , has terminated the collaboration and license agreement related to development of Geron’s sole pipeline candidate, imetelstat. The termination is effective from Sep 28.

Shares of the company crashed 62.9% on Sep 27, following the disappointing news. Geron’s shares have fallen 45.6% in the past six months against the industry’s rise of 3.1%.

 

The companies were developing imetelstat in two clinical studies – phase II IMbark and phase II/III IMerge – evaluating it in myelofibrosis and myelodysplastic syndromes, respectively.

The decision was taken by Janssen as part of strategic evaluation and prioritization of the assets in its portfolio. With this termination, global rights to develop and commercialize imetelstat were returned to Geron. However, Geron lost its major source of revenue as Janssen does not hold any economic or funding obligation to Geron for imetelstat development. This is going to severely impact Geron’s top line.

However, Janssen will provide operational support during the transition of imetelstat program to Geron over the next 12 months. Janssen will also continue to supply imetelstat to Geron for clinical development over the next two years.

Geron plans to develop imetelstat independently in phase III for myelodysplastic syndromes by mid-2019. This is based on supportive data from initial and expansion arms of phase II portion of IMerge study. However, final data from this portion will be available in 2019. This will likely increase operating expenses of the company, thereby hurting its profits.

A decision on IMbark study will be taken after further analysis and discussion with experts.

In the press release, Geron raised its operational expense guidance to $37 million from the previous guidance of $30 million. However, the company expects its liquid reserves of $183 million to be enough to support initiation of phase III portion of IMerge study.

We remind investors that Acceleron Pharma Inc. (XLRN - Free Report) and its partner Celgene Corporation (CELG - Free Report) have successfully completed two late-stage studies on their pipeline candidate, luspatercept, also being developed for myelodysplastic syndromes. Regulatory applications are expected to be submitted in the United States and Europe in 2019. This further raises concern for Geron as luspatercept is likely to be approved earlier and will enjoy first-move advantage.

Zacks Rank

Geron currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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