J&J bets up to $935M that Geron's drug can shake a checkered past

Days after finally getting the FDA's go-ahead to resume the stop-and-start development of its lead candidate, Geron ($GERN) has signed a deal to cut Johnson & Johnson ($JNJ) in on the process, putting the biotech in line for as much as $935 million if all goes according to plan.

The back-loaded agreement focuses on imetelstat, Geron's treatment for blood cancers, and J&J's Janssen unit is paying just $35 million up front to collaborate on the project and promising up to $900 million more if it comes through on undisclosed development, regulatory and commercial goals.

The news sent Geron's shares, battered by months of uncertainty surrounding imetelstat, up nearly 40% on Thursday evening.

With the two companies aligned, the plan now is to map out Phase II studies in myelofibrosis and myelodysplastic syndrome--imetelstat's principal indications--and begin enrollment in 2015, thereafter rolling into Phase III if the drug proves itself worthy. Separately, J&J and Geron are planning to launch an exploratory Phase II trial in acute myelogenous leukemia, pursuing late-stage studies in that indication if they can demonstrate a strong signal.

For Geron, the deal is hardly a golden ticket, and, with the companies agreeing to split R&D costs 50-50, the biotech will be using a fair bit of that new cash just to keep imetelstat moving. But, in J&J, the company has found a partner with a pedigree for making the best of such collaborations. J&J's external R&D team is responsible for wooing Pharmacyclics ($PCYC) and getting its blood cancer treatment ibrutinib all the way to FDA approval. And analysts have hailed similar promise for daratumumab, a multiple myeloma treatment J&J licensed from Genmab for up to $1.1 billion, and ARN-509, the prostate cancer-fighting star of the company's $1 billion deal for Aragon Pharmaceuticals.

"By leveraging Janssen's ability to fully integrate and strategically align global oncology development and commercialization, we expect this collaboration to expand the development of imetelstat across a range of hematologic malignancies and potentially increase the speed with which imetelstat can be made available to patients with these serious, life-threatening diseases," Geron CEO John Scarlett said in a statement.

The deal is a welcome turn for Geron and its shareholders, who have endured an up-and-down year on Wall Street as imetelstat has been plagued by safety issues that spurred FDA holds on two midstage trials. The agency backed off of a Mayo Clinic-sponsored study in June and finally cleared Geron's in-house trial last week.

After more than 20 years in drug development, Geron has never found its way to the finish line in R&D. The company backed away from its ambitions in stem cells in 2011 and rebranded itself as a cancer-focused outfit, but a slew of clinical setbacks has reduced its pipeline to imetelstat alone and pared down that drug's potential indications in the process.

- read the statement

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