In time, this purchase might make BioTime the company that Geron was supposed to be.
The transaction leaves Geron to focus on anti-cancer therapies, but it’s not completely leaving the stem cell space: Geron is left as a much more passive investor in the regenerative medicine field, holding approximately 21% of the BioTime subsidiary commercializing the assets. BioTime “will also pay royalties to Geron on sales of any commercialized products”, reports Nature, implying that Geron management still considers it important to have an interest in stem cell based therapeutics.
In time, this purchase might also make BioTime the company that Geron was supposed to be.
In late 2011, during the fallout of Geron’s initial announcement that it would all but abandon its stem cell programs, many thought it was the end of stem cell commercialization as it seemed that the market leader had a lack of confidence in the field. No one else would take up the torch. Adam Feuerstein at The Street claimed that “only dreamers and fools invest in embryonic stem cell stocks”, and had this to say about Geron:
For 21 years, Geron has lured investors with the promise of turning embryonic stem cells into new tissue or organs that one day might help paraplegics walk, cure diseases like diabetes and Parkinson’s and prevent heart attacks.
But other than participating in some of the pioneering stem-cell lab research in the late 1990s, Geron’s efforts in the field have proved futile. Geron’s accumulated deficit approaches $700 million; its publicly traded stock has been a perpetual loser over 15 years…
But the decision to drop Geron’s stem cell portfolio was an obvious one to John Scarlett, who was the new CEO at the time. The Wall Street Journal reported that Geron was unprofitable and quoted Scarlett as saying that the stem cell portfolio would yield meaningful value “substantially further into the future than for [Geron’s] oncology products.“
So shelving the stem cell program was actually the inevitable pragmatic choice for a company with limited funds, and not the indictment of the stem cell field that many believed at the time. Geron could not pay dividends to shareholders while carrying an accumulated deficit, and so Scarlett, facing a long upward battle, was forced to make a logical choice.
It was also a natural decision for Scarlett to make.
Prior to joining Geron, he was CEO of Proteolix, a company developing proteasome inhibitors for use in myeloma and Non-Hodgkin lymphoma. Between February 2002 to October 2008, Scarlett served as President, then CEO, of Tercica, developing products that included recombinant insulin-like growth factors for treatment of endocrine diseases. So while stem cell medicine would have been an interesting product area to develop, it would have been unwise for Scarlett to move in that direction. Oncology products won the match.
Now contrast John Scarlett with Tom Okarma and Michael West, who now pick up Geron’s portfolio.
Are dreamers acquiring Geron’s stem cell programs? Yes. Are they fools? Absolutely not.
Michael West spent over twenty years working in the regenerative medicine space. He built up Geron’s telomerase technologies between 1990 and 1998 and then led ACT until 2007 during a tumultuous period marked by several major advances, which many considered to be overhyped. Apparently these tactics were disconcerting to West, and according to Nature he left ACT to head BioTime due to disagreements with William Caldwell, the then chief executive and most experienced businessperson on the ACT team.
Yet despite the obvious fit of Geron’s stem cell research program at BioTime, it’s difficult to judge whether its development will be in the clear.
Like Geron, BioTime has also been losing money for years, and it’s uncertain if West will be able to pull it to profit in the near future. Over half of BioTime’s revenue in 2011 was grant income, a source very obviously dependent on government funding and one which almost everyone is currently concerned about. BioTime’s “restart” of Geron, as Okarma put it, may be successful now that the stem cell program is within a much more hospitable corporate environment (Geron was still losing $100 million per year in 2011). In short, 2013 BioTime seems like a much cleaner version of 2011 Geron.
Almost presciently, Feuerstein concluded his 2011 article at The Street saying:
The company hopes to find another company to acquire or license its stem cell programs. Dreamers and fools, step right up.
Yet in 2013, the company acquiring Geron’s stem cell program is being led by the same people that created it. They’ve picked it up in the apparent absence of competition for the technology. And they’ve done so for a fraction of what it will take to clean up Geron.
So Feuerstein was partly right: Are dreamers acquiring Geron’s stem cell programs? Yes. Are they fools? Absolutely not.
If anything, buying Geron’s stem cell program at a time when most people thought it would languish on a shelf is a move of an astute investor. The purchase might even let BioTime deliver the stem cell therapies Geron could not, but at some point I might start viewing this transaction less like an acquisition and more like a name change.
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