Biotech company presents a “call option” on stem cell business.
Geron Corporation (NASDAQ: GERN, Bullboard) has always been a controversial company because of its ties to stem cells. Geron has been public since 1997 and has seen its shares of ups and downs with the stock trading north of $20, $40, and even briefly higher than that. But over the last five years it has spent most of the time trading under $10.
The company was on track to be one of the first to have some treatments on the market originally tied to stem cells. That may or may not be the case now. On May 14, 2008, the FDA notified the company of a clinical hold on Geron's Investigational New Drug (IND) submission for GRNOPC1. This was for the treatment of spinal cord injury, and the company noted that it had been in communications with the FDA for over four years. This hold is still an unknown on the reasoning from the FDA, and this was almost completely unexpected.
There is also a political trade here where stem cell stocks might benefit greatly from the 2008 elections. If McCain wins, it is believed that he will loosen up much of the bans on stem cell research. If a Democrat wins, then it is believed that stem cell companies will benefit from an even larger loosening of research bans combined with government funding projects that have been more limited over the last seven years.
The good news is that the company has $195 million in cash available to weather the storm and it has no long-term debt to speak of; its operating costs are no threat to its balance sheet for more than three years at current levels.
Geron is at a critical juncture with the FDA, but now that shares have sold off this much the company represents more of a "call option" on the business of stem cells. Even with a $329 million market cap, that still holds true.
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