Geron Fans Make Mountain Out of GE Molehill

For purposes of full disclosure: I recommended a Geron short to readers of my newsletter in January. I closed out the Geron short in February for a 26% gain.

As I told my subscribers at that time, I'm not against stem-cell medicine, and I certainly hope one day that the field provides medical breakthroughs. I simply don't believe Geron is going to be the company to deliver on the promise of stem cells, based on its ignominious track record of drug development so far.

And as I reported in March, some stem-cell experts are also skeptical about Geron's chances for success with GRNOPC1.

Getting back to Tuesday's announcement, Geron is licensing some of its embryonic stem-cell intellectual property to GE Healthcare, which will then develop and market a line of embryonic stem-cell products for use in drug discovery. Think of this agreement as stem-cell infrastructure. The products that come out of the alliance will be used to develop stem-cell drugs, but are not drugs themselves.

Financial terms of the deal were not announced, but one analyst who covers Geron (with a buy rating and a $7 to $8 price target) said Tuesday that he expects Geron to receive a mid-single digit royalty on sales of products sold by GE Healthcare.

If Geron is lucky, the GE Healthcare deal will bring in six-figure revenue, which will not make a dent in the company's huge operating losses. (Geron lost more than $17 million in 2008.)

So far, Geron has been unable to get any company to sign on as a development and marketing partner for its stem-cell or cancer drugs.