Nov. 23–Geron was once a high-flier among biotech companies, best known as the leader in growing cells from human embryos to treat a host of ailments, like heart disease, diabetes and Parkinson’s.

It captured the imagination of investors and the media with ground-breaking scientific papers, an unending stream of patents, and artful news releases that promised a medical “fountain of youth” for cells and hinted at the possibility of human immortality.

Adding to the glow, the Menlo Park company acquired the patented technology used to produce Dolly, the famed Scottish sheep cloned from her genetic “mother.”

But its route to success has been bumpy, and it remains years away from marketing its first treatments. That makes it a prototype for the biotech industry, where many companies are valued more for their potential than for their bottom line.

High enthusiasm is followed by a fear of heights. An extraordinary rise gives way to a sudden fall — and then maybe, just maybe, a recovery.

Before any Geron product was ever tested in human patients, its technologies promised to strengthen weakened hearts, regrow broken nerves and even stop cancer in its tracks.

As a result, Geron’s public profile loomed large for a company that at its peak had just 148 employee. And that was reflected in the market value of its shares, which in early 2000 topped $1.5 billion.

Then came the inevitable crash.

“We were at the risky end of a risky sector,” says Geron chief financial officer, David L. Greenwood.

Its stock price dropped like a hot-air balloon running out of gas. It touched down at $1.41 this March, a decline of 98 percent in three years.

To survive, the company had to respond to the concerns of a market disillusioned with the many publicly traded biotech companies that, like Geron, had neither products nor profits.

In two waves of layoffs, it slashed its staff by two-thirds. It pared back spending and concentrated on practical products that its executives believe have a chance of reaching patients and bringing in revenue.

Gone is the work on animal cloning — on agricultural uses for the Dolly technology — which Geron has licensed to other companies. Gone too is the rhetoric of its early days when it regarded itself as an “anti-aging” company — its very name, Geron, borrowed from the Greek word for old people. Banished is talk of Ponce de Leone and extending the human lifespan.

“That was one of the cultural issues I changed very quickly once I became CEO,” says Dr. Thomas B.Okarma, who took the reins in 1999 after a stint running research and development at Geron.

“I don’t believe in extending the life span. We have enough problems on this earth,” he says. “I am concerned that people are able to live out their theoretical lifespan independently and healthy.”

In that vein, Geron is betting on a cancer vaccine, already in the early stages of testing in patients, and a first-in-its-class cancer drug that could be tried in patients next year. By 2005, it could also be testing cell therapy to treat spinal cord injuries.

There are stories like Geron’s throughout the biotech industry.

Young, innovative companies give hope to patients with incurable disease but all too often disappoint that hope. They offer investors the prospect of immense reward along with the risk of losing every last dime. And periodically, they produce useful products, if they’re able to survive.

Survival has had its price at Geron.

Its executives have learned to share secretaries. They write their own press releases. They’ve whittled down the size of research teams and farmed out work to commercial research operations and to university collaborators.

The paring back may be paying off.

Although widely shunned by Wall Street analysts, Geron still managed to sell an additional $85 million in shares this year. That leaves it with more than $100 million in the bank, enough cash to last until 2007.

And at last it has a few potential products it can point to, including a cancer vaccine being tried in patients, and a novel cancer drug that could begin testing next year.

These two treatments depend on a series of discoveries that date back to the formation of Geron in 1990 as an “anti-aging” company.

The company has broad patent claims on a human enzyme, a naturally occurring chemical called telomerase that is present in tumors, helping them to live and grow indefinitely, but that’s absent in most healthy tissue.

Today, scientists at Duke University are testing a vaccine in advanced prostate cancer patients that stimulates the body to attack cancer cells containing the enzyme.

This March, test-tube experiments showed that the vaccine might work in other types of cancer as well. Although the research was not done in living patients, a company press release raised the possibility of “a universal cancer vaccine,” triggering a buying frenzy that raised Geron’s stock price 147 percent. The company is developing the vaccine with Merix Biosciences, a company started by Duke researchers.

Sometime next year, Geron is planning to begin testing an experimental drug of its own, now called GRN163, for blocking the telomerase enzyme in cancer patients. In animal studies, the drug kills cancer cells but isn’t toxic to healthy tissue.

Still, the drug is unlikely to be “a magic bullet that supersedes and renders obsolete everything else,” says Okarma. But he describes its effect as “synergistic” when used with traditional cancer chemotherapy. “That means more than additive. One plus one is three.”

University of California in San Francisco’s Elizabeth Blackburn, the co-discoverer of telomerase, questions the sweeping predictions that were made about the enzyme’s potential in the past. But she supports Geron’s attempt to apply the research to cancer treatment despite what many see as exaggerated claims. “You don’t want to throw the baby out with the bathwater, here the bathwater being the hype.”

Geron is probably best known for research it sponsored at the University of Wisconsin, where scientists grew big batches of cells from a few that were plucked from discarded human embryos. These “embryonic stem cells” appear to have the ability to become any one of the hundreds of cell types present in an adult human and can be grown in limitless quantities.

The stem cells in theory can be used to generate replacements for patient cells destroyed by injury or disease, for example, rebuilding a heart weakened by a heart attack or replacing brain cells damaged by Alzheimer’s or Parkinson’s disease.

Just this month, the company announced the results of experiments on rats whose spinal cords had been crushed. Researchers at UC Irvine used nerve cells, grown from Geron’s stem cells, to treat the animals with injuries similar to those suffered by paraplegics. A month later, the treated rats were able to support their weight on all four paws and hold their tails up in the air.

All this is good news for a company that has disappointed investors in the past.

But skeptics remain.

“This is a company that historically has overpromised and underdelivered,” says John McCamant, editor of the Medical Technology Stock letter. McCamant notes that he also runs a hedge fund that has sometimes taken a short position on Geron stock. His investment newsletter does not recommend the company’s shares: “These kind of companies attract traders to the sector rather than long-term investors.”

Rodman & Renshaw biotech analyst Reni Benjamin is more upbeat. He started covering Geron stock in June, when it was under $6.00 and saw it climb past $16 before settling back down again.

But now Benjamin, whose firm raised $20 million for Geron earlier this year, wonders whether the company is overvalued once again: “It may be getting a little ahead of itself.”

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(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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