Geron's exit symbolic ding for stem cell research

[November 16, 2011]  WASHINGTON (AP) -- Geron Corp. is exiting the field it pioneered in a calculated business move that underscores the long, costly path embryonic stem cells face to become real-world products.

Late Monday, the company said it would halt its study of a stem cell-based treatment for spinal cord injury, the first embryonic stem cell trial approved in the U.S.

Geron's withdrawal leaves a handful of U.S. companies pursuing medicines using embryonic stem cells, which are capable of morphing into any of the more than 220 cell types in the human body. Scientists hope that one day stem cells might be used to replace or repair damaged tissue from ailments such as heart disease, Parkinson's and stroke.

The Menlo Park, Calif., company had long been viewed as the undisputed leader in stem cell therapies, thanks to patents on technology used to grow, manipulate and inject stem cells into the human body. The company helped finance researchers at the University of Wisconsin who first isolated human embryonic stem cells in 1998, allowing the cells to be grown in the laboratory.

Experts say Geron's departure is more a symbolic setback than a real one, since the vast majority of work in the field will continue to be funded by government and academic institutions.

Geron said it still believes in the potential of stem cells and the company is seeking a partner or buyer for its stem cells division.

Despite the promise, the payoff from stem cell research was too far off for Geron. It has no products on the market and would have spent $25 million per year to continue its stem cell program.

The company acknowledged Monday it could make more money by completing two experimental cancer drugs that are already in mid-stage testing. Geron only began testing its stem cell treatment last year after a decade of research, and it could have been a decade more before federal regulators approved it for general use.

Experts say stem cell companies face particular challenges in the current economic climate, when investors want to see experimental therapies turned quickly into marketable products.

"I think it points out the difficulty of bringing some of these cell therapies through to clinical applications if the main driving force has to be a financially viable product," said Dr. Timothy Kamp, director of the stem cell medical program at the University of Wisconsin.

Geron's stock price fell 45 cents, or 20 percent, to close at $1.75 Tuesday. The company's shares have steadily declined since mid-2004 amid regulatory and funding challenges for the stem cells space. Companies in the field have consistently underperformed the broader Standard and Poor's 500 index of companies.

Joseph Pantginis, an analyst with Roth Capital Partners, said it would have taken five to 10 years before Geron's lead stem cell product reached the market.

"This is still very much a fledgling space and some people would even consider stem cells to be a science experiment, so there's still a long way to go," Pantginis said.

University of Wisconsin professor Alta Charo said Geron's move "may suggest that a different business model is needed, one with a longer timeline for return on investment." Charo is a professor of bioethics and helped draft the National Academies guidelines for stem cell research.

Last year Geron launched the first U.S. study of a stem cell treatment in humans: an injection of 2 million stem cells designed to repair spinal cord injury.

But late Monday, the company said the high costs and commercial uncertainties of stem cell research forced it to close the study and instead focus on the more lucrative, predictable market for cancer therapies.

CEO Dr. John Scarlett told investors and analysts Tuesday that focusing on cancer drugs will allow Geron to make more money in a shorter period of time, particularly when "big pharma and big biotech companies are increasingly hungry for first-in-class cancer programs."

He stressed that Geron's study has not encountered any problems and that it hopes another company will acquire and continue its work.

"I hope that we're not letting anybody down. And we genuinely believe that the program itself has a future and we'll be looking to find a suitable home for it," Scarlett said.

Analysts say Geron's stem cell business could be acquired by Alameda, Calif.-based BioTime, a company founded by former Geron scientists. Other potential acquirers could include larger pharmaceutical companies like Celgene Corp., Pfizer Inc. and Teva Pharmaceuticals, which have dabbled in stem cells without making major investments.

Analysts said the company's decision reflects the challenges confronting all cash-strapped biotech and drug developers during the economic downturn, when venture capital has all but dried up.

"This was a classic business school calculation: You have two blockbuster programs but only enough money for one, so you choose the one that is further along," said Steve Brozak, president of WBB Securities.

Geron expects to report mid-stage data from two experimental cancer drugs in 2012 and 2013, whereas its stem cell study was in preliminary safety testing and only included four patients.

There are currently no embryonic stem cell-based therapies on the market and, besides Geron, only Marlborough, Mass-based Advanced Cell Technology has FDA approval to test a product. Advanced Cell Technology had just $14 million in cash at the end of the third quarter. By contrast, Geron completed the period with over $180 million on hand.

For now the vast majority of stem cell research will continue to be funded by state and federal governments. In the last fiscal year the National Institutes of Health designated over $164 million in funding for embryonic stem cell research, up from $141 million the year before.

Opponents of the research object because the cells were obtained from destroyed human embryos. Though current research is using cells culled long ago, opponents also fear research success would spur destruction of new embryos. Proponents say the research cells come mostly from extra embryos discarded anyway by fertility clinics.

President George W. Bush had limited the availability of federal funding to embryonic stem cell groups that were already in existence in 2001, but which in many cases had drawbacks. In 2009 President Barack Obama's removed that limitation, increasing stem cell funding for dozens of additional stem cell lines.

[Associated Press; By MATTHEW PERRONE]

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