Geron's first-mover disadvantage: first-ever human stem cell study held up

It's not easy being first. Biotech company Geron (GERN) had to wait more than a year before getting the green light from federal regulators in January to begin the first study using human embryonic stem cell-based therapies in humans. The early-stage trial is looking at the safety of its drug GRNOPC1, which is designed to treat patients with spinal cord injuries.

Now the company, which is in the spotlight because of the groundbreaking nature of the treatment, has hit another speed bump after the U.S. Food and Drug Administration put the study on hold in August. The reason? Animals injected with the experimental drug candidate developed microscopic cysts.
Despite the setback, analysts say the problem is relatively minor, as it's common for patients with spinal cord injuries to develop cysts where there's compression in the spinal column. Steve Brozak, president and co-founder of WBB Securities in Westfield, New Jersey, expects federal regulators to investigate the issue fairly swiftly. "I would say to you that Geron is not going to go quietly into the night in terms of not getting an answer on this one," Brozak says.

The stem-cell study has attracted worldwide attention as it is likely the first that would truly test the ability of human embryonic stem cells to be used to treat some of society's most troublesome medical problems, such as spinal cord injuries. Because of their pluripotency, or ability to become virtually nearly any cell in the human body, human embryonic stem cells are also being looked at to treat heart disease, brain disorders, and many other conditions linked to damaged cells.

Menlo Park, California-based Geron's drug candidate contains living cells that help restore nerve fibers and the central nervous systems' protective sheath called myelin. In the past, the company reported the treatment helped paralyzed rats walk.

In a statement issued on August 27, Geron was quick to point out that the cysts that the animals developed did not spread, were "confined to the injury site, and had no averse effect on the animals." Even though the cysts developed with "higher frequency" than in some previous tests, the company reported -- importantly -- that none of the animals developed teratomas, a type of tumor.

Brozak says that because of the extreme sensitivity around stem cells, Geron has been exceptionally communicative with the FDA about developments in its study. "This is much ado about nothing," says Brozak. He cites the statistic that cysts appear in the spinal column area of more than 50 percent of spinal injury patients. "If this were some other company and the four letters S-T-E-M weren't involved, this would be a non-issue," he says.

The company's stock was trading at $6.86, about 26 percent off its 52-week high, in late action on Tuesday. Brozak predicts the FDA in Washington, D.C. may deal with the issue after the summer doldrums end. "When the building becomes repopulated, you'll get a better answer," says Brozak. No doubt Geron CEO Thomas Okarma and his team will be waiting by their phones, or email inboxes.

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