Geron Fans Make Mountain Out of GE Molehill

Geron(GERN Quote) shares rose sharply Tuesday after the company announced a pact with the health care unit of General Electric(GE Quote) to develop embryonic stem-cell test products.

As with most announcements that come out of Geron, investors overreacted Tuesday, sending shares up 18.4% to $7.92. This makes shorting the stock a tempting option. The agreement with GE Healthcare is relatively minor and isn't likely to have much of a financial benefit for Geron.

Nonetheless, it's probably still too early to put on a Geron short. The company is still gearing up to enroll the first paralyzed patient in the company's phase I spinal cord injury study with its stem-cell drug GRNOPC1.

That announcement could come as early as July, and when it does, expect a whole of lot of media coverage and another pop in Geron's stock price. This is exactly what happened in January when Geron announced the agreement with the U.S. Food and Drug Administration on the design and conduct of the study.

A better time to short Geron will be after the next leg up in the company's stock price. Don't be surprised to see Geron take advantage of its inflated stock price to raise money again. The spinal cord injury study probably won't be fully enrolled until well into 2010, with data not ready until 2011. That's a long time to wait for a study that, at best, will only demonstrate GRNOPC1's relative safety. Anyone hoping for the drug to be a miracle cure for paralyzed patients is probably going to be disappointed.