With a market cap of $2.67 billion, Geron Corporation (GERN) is a small-cap, commercial-stage biopharmaceutical company focused on developing and commercializing therapies for blood-related cancers.
Geron's stock has received a lot of attention from investors this year, after the U.S. Food and Drug Administration (FDA) approved its lead candidate, imetelstat, to treat lower-risk myelodysplastic syndromes (MDS) with transfusion-dependent anemia. The stock has soared an eye-catching 110% year-to-date, compared to the S&P 500 Index’s ($SPX) gain of 18%.
While Wall Street rates the stock as a “strong buy,” I believe Geron remains a high-risk, high-reward opportunity due to its reliance on the success of a single drug that has recently been approved. Let's see if this penny stock is worth buying right now.
Geron: A High-Risk, High-Reward Biotech Bet
Imetelstat, Geron's telomerase inhibitor, targets abnormal bone marrow cells that cause blood cancers such as MDS and myelofibrosis (MF). Imetelstat works by inhibiting telomerase (an enzyme that cancer cells use to multiply), ultimately slowing down disease progression and improving patient outcomes.
On June 6, the FDA approved Rytelo (imetelstat) for the treatment of adults “with low- to intermediate-1 risk myelodysplastic syndromes (MDS) with transfusion-dependent (TD) anemia requiring four or more red blood cell units over eight weeks who have not responded to or have lost response to or are ineligible for erythropoiesis-stimulating agents (ESA).”
Rytelo is “administered intravenously (IV) at a dose of 7.1mg/kg of body weight once every four weeks.” Geron launched Rytelo commercially in the U.S. at the end of June.
MDS is a bone marrow disorder that causes anemia and fatigue, requiring patients to receive regular blood transfusions. Imetelstat has demonstrated promise in reducing or eliminating the need for transfusions, potentially improving patients' quality of life. Rytelo generated $882,000 in total net revenue in the second quarter since its launch in June. The company also posted a net loss of $67.4 million.
Geron ended the second quarter with $430.4 million in cash, cash equivalents, and marketable securities. The company believes that this cash balance, combined with projected Rytelo sales revenues in the U.S., will be sufficient to fund its projected operating requirements until the second quarter of 2026.
MDS is a rare disorder. In the U.S. alone, roughly 12,000 to 15,000 new cases are diagnosed each year. For Geron to make significant profits from Rytelo (which could take years), the drug needs to have an expensive price tag.
Geron is conducting early-stage clinical trials to assess the efficacy of imetelstat for MF as a single agent and in combination with other therapies. MF is a rare form of bone marrow cancer with few treatment options. Geron's trials suggest that imetelstat could be a new option for patients who have not responded to previous treatments.
Notably, IMpactMF is a Phase 3 clinical trial to assess imetelstat's efficacy for intermediate-2 or high-risk MF. Furthermore, IMproveMF is a two-part Phase 1 clinical trial to evaluate imetelstat in combination with ruxolitinib for the treatment of intermediate-1, intermediate-2, or high-risk frontline MF. There are a few other candidates in the company's pipeline.
However, it takes many years for clinical trials to be completed, and regulatory approvals to be obtained, before a drug is released to the market.
According to estimates, Rytelo could generate $54 million in revenue by 2024. Furthermore, estimates show that sales could reach $2.1 billion by 2035. Analysts predict that once approved, MF treatments will generate $98 million in revenue by 2028, rising to $788 million by 2035. There are plenty of "ifs” here.
Analysts who cover Geron predict total revenue of around $58.9 million in 2024, rising to $277.7 million in 2025.
What’s Wall Street's Take On Geron Stock?
Overall, Wall Street believes Geron stock is a “strong buy.” Out of the nine analysts that cover the stock, seven rate it a “strong buy,” while one rates it a “moderate buy,” and one suggests it’s a “hold.”
Recently, Goldman Sachs and Barclays analysts reiterated their respective “buy” ratings for GERN.
The average target price of $6.89 suggests that the penny stock has an upside potential of 55.5% above current levels. Further, the high estimate of $10 implies that GERN can climb 125.7% over the next 12 months.
The Bottom Line on Geron Stock
Like any classic biotech investment with only one approved drug in the market, Geron is still a high-risk, high-reward case. Given that the success of Rytelo could take a few years with the risks stated above, Geron is suitable for investors with a high appetite for risk. The company’s long-term growth potential will depend on how it uses imetelstat to explore treatment for other cancers or hematological disorders, beyond MDS and MF.
That said, for those who are willing to bet on Rytelo's success and the likelihood of the company developing other successful drugs in the future, Geron may offer the potential for significant rewards.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
