Biotech outfit Geron nears spinoff of stem cell business

Geron ($GERN) has taken a step toward striking a deal that could revive development of its stem cell therapies. The Menlo Park, CA-based biotech and BioTime ($BTX) inked a letter of intent, a nonbinding agreement, which outlines some of the terms for a BioTime subsidiary to take over Geron's embryonic stem cell programs that were shelved last year as Geron narrowed its focus to cancer drug development.

BioTime's interest in scooping up the stem cell programs from Geron has been public knowledge since at least last month, with news that ex-Geron CEO Thomas Okarma was angling for the assets to beef up the pipeline of the new BioTime subsidiary under his leadership. Geron and BioTime haven't negotiated all the details of a deal, but the letter of intent seems to increase the likelihood that Okarma is close to regaining control of the stem cell therapies.

Geron revealed its goal to reap value from finding a new home for its stem cell program last year, but the assets have sat on the proverbial research shelf without a deal, and supporters of the work have fretted that the company's exit from the research was a setback in the already stagnant advance of multipurpose stem cells into the commercial realm. Under the proposed deal with BioTime, Geron shareholders would hold a 21.4% stake in the regenerative medicine subsidiary, BioTime Acquisition Corporation, and get warrants to buy 8 million shares of BioTime stock at a set price.

BioTime has signed up to fund the subsidiary with $5 million in cash and provide $30 million in its common stock, warrants to buy 8 million BioTime common shares and rights to embryonic stem cell lines, with minority stakes in two of BioTime's subsidiaries. For its contributions, BioTime will control a 71.6% stake in the subsidiary, and an unnamed private investor would control a 7% stake in the new outfit for a $5 million investment, according to Geron's press release.

No final deal has been hammered out. However, it finally looks like Geron, which has stumbled recently in its oncology program, could finally land a deal for its stem cell programs. BioTime is also promising royalties for Geron for potential product sales, which have been mostly a fairy tale for stem cell developers to this point.

 - here's the release