Why Geron Is Getting Crushed

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Geron Corp. (NASDAQ: GERN) shares were absolutely crushed on Thursday morning after it was announced that Janssen Biotech, a subsidiary of Johnson & Johnson (NYSE: JNJ), has terminated the 2014 collaboration and license agreement (CLA) with the firm.

Janssen stated that it made this decision as the result of a strategic portfolio evaluation and prioritization of assets within their portfolio. As a result, Geron has regained the global rights to develop and commercialize imetelstat.

Under the terms of the CLA:

The effective date of the termination is September 28, 2018, after which the licensed rights to the imetelstat program, including intellectual property rights generated under the collaboration, return to Geron without any continuing economic obligations to Janssen, and Janssen has no further obligations to fund any of the current ongoing imetelstat clinical trials.

The transition of the imetelstat program to Geron is expected to take place over the next year with operational support from Janssen, including the orderly transfer of all ongoing clinical, regulatory, medical affairs, manufacturing and preclinical activities to Geron. Also Janssen is expected to supply imetelstat to Geron for up to 24 months during a transition period for clinical manufacturing.

John A. Scarlett, M.D., Geron’s president and CEO, commented:

We are grateful for the collaboration with Janssen, who successfully managed two Phase 2 trials of imetelstat. We believe the clinical results from IMbark provide valuable insights into the potential future development of imetelstat for an underserved relapsed and refractory myelofibrosis patient population. We also believe the combined data of 38 patients from the initial and expansion cohorts for the target patient population from the Phase 2 portion of IMerge support further development of imetelstat, and we are therefore prioritizing the initiation of the Phase 3 portion of IMerge.

As a result, the company revised its financial projections and now expects 2018 operating expenses to be about $37 million (previously $30 million). As of August 31, 2018, the company had roughly $183 million in cash and marketable securities, which is expected to be sufficient to support its plans to initiate the Phase 3 portion of IMerge in 2019.

Following the announcement, the stock was down more than 70% to $1.85 in early trading Thursday. The consensus analyst price target was $5.75, and the new 52-week range is $1.50 to $6.99.