Geron's ( GERN) upcoming and widely publicized stem cell trial involving patients with spinal cord injuries was criticized as risky and clinically dubious because the entire rationale for the study is "based on a single experiment in eight rats."

The negative view of Geron's research effort came from a spinal surgeon and stem cell researcher during a conference call for institutional investors held Monday by Summer Street Research Partners, an independent health care research firm.

A recording of the conference call was obtained by TheStreet.com, which chose not to disclose the doctor's name out of privacy concerns since the call was not intended for public dissemination. At the beginning of the call, the doctor said he had no financial ties to Geron, nor did he own or short Geron stock.

In January, the Food and Drug Administration granted Geron permission to launch a small safety study of its human embryonic stem cell-derived therapy in patients paralyzed from the waist down due to severe spinal cord injury. Geron and other stem cell advocates hailed the study's start as a landmark achievement in the nascent field of regenerative medicine.

But investors have had a less enthusiastic reaction to the news. The price of Geron shares rose from $5 to more than $8 in the days immediately after the Jan. 23 announcement, but the gains were quickly sold. Geron's stock has fallen steadily since then, hitting a low of $3.79 on March 5, hurt in part by a $43 million spot financing deal and a sharp downturn in the broader market.

Even President Obama's lifting of the federal research ban on stem cell research Monday failed to provide more than a marginal lift to Geron's stock price, which closed Tuesday at $4.27.

Geron shares were up 1.4% to $4.21 in recent trading.

Wall Street's health care investors, most notably biotech-focused hedge funds, have been more inclined to steer clear of Geron or short the company's stock. Geron's short interest has risen from 8 million shares to 17 million shares over the first two months of the year. Conference calls for Wall Street health care investors with experts critical of Geron's research, like those held by Summer Street Research on Monday, explain why.

The doctor on the Summer Street conference call, a spinal cord injury expert who has also conducted stem cell research, was skeptical about Geron's study because there is very little animal data to support the theory that a therapy derived from stem cells will benefit patients with severe spinal cord injury.

"The fact that Geron's entire study hinges on this one experiment in eight moderately injured rats is tenuous in terms of efficacy," he said.

The experiment referred to, conducted by Dr. Hans Keirstead of the University of California at Irvine, was done on eight rats whose spinal cords were purposefully injured to paralyze the hind legs. Rats treated with the Geron therapy after seven days saw some function return to their paralyzed legs. Geron commonly shows a video of the rats before and after treatment as part of the company's pitch to investors.

The doctor warned, however, that the rats in the experiment only had moderate spinal cord injury, while human patients in Geron's first safety study will have severe spinal cord injury. Moreover, when the same rat experiment was conducted in rats with severe spinal injuries or when the start of treatment was delayed for more than a week, the Geron therapy had no effect.

The Geron therapy is derived from a universal donor stem cell line that will be considered foreign by patients. As a result, patients will need to be placed on drugs that suppress their immune systems to lower the risk that the Geron therapy is rejected.

"We don't know what will happen when these cells are placed into a human, which is the reason immune suppression is required," said the doctor on the Summer Street conference call. "The risk is that these are not patients you would otherwise want to have on immune suppressants because the severity of their spinal cord injuries, the trauma they've suffered, their surgery and wounds make them more susceptible to infection."

Moreover, the doctor said, patients' bodies may reject the Geron therapy as soon as immune suppression drugs are stopped after 42 days, per the study's protocol. Typically, when a patient undergoes some type of transplant, immune suppression therapy is required for life.

Another safety concern is the risk that the cells in Geron's therapy may grow uncontrollably and form tumors on the spinal cord. Geron has stated that tumor growth has not been detected in any of its animal studies, but again, the theoretical risk remains when Geron moves its therapy into humans.

"If one patient gets a tumor from the Geron therapy, it will be catastrophic," said the doctor on the Summer Street call.

Geron officials, including CEO Tom Okarma, have tried to temper expectations from the company's first study of a stem cell-derived therapy. The main goal of the study is to determine the therapy's safety. The therapy is not expected to make paralyzed patients walk again, but it is hoped that some small amount of sensation or function returns.

Geron also stresses that it has done an extraordinary amount of work to ensure that its therapy is as safe as possible before beginning a study in which it will be injected into human spinal cords for the first time. The FDA only gave permission to Geron to start the study after reviewing an applicaton that included 22,000 pages of data.

That has not stopped some experts from questioning Geron's science. In a Jan. 30 article published in the journal Science, neuroscientist and stem cell researcher Dr. Evan Snyder of the Burnham Institute for Medical Research said: "There's a lot of debate among spinal cord researches that the preclinical data itself doesn't justify the clinical trial."

Dr. John Kessler, a neurologist and director of the stem cell institute at Northwestern University, was also critical of the Geron therapy in a Jan. 23 New York Times story. "We really want the best trial to be done for this first trial, and this might not be it," he said.

It's largely these voices of caution, including the doctor on the Summer Street conference call Monday, which have made institutional investors wary of Geron.

Know what you own: Other companies involved in stem cell research include StemCells ( STEM), Cytori Therapeutics ( CYTX), Advanced Cell Technology ( ACTC.PK), Aastrom BioSciences ( ASTM) and BioTime ( BTIM.OB).

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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