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Author: Digger65 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1856  
Subject: Re: Why I bought GERN Date: 2/29/2000 10:34 AM
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GaryX,

A highly risky play which could either make you a genius or a pauper. Geron could turn into a giant in 5-10 years, or could disappear to be remembered as a minor player. Don't invest any money you can't afford to lose.

Your individual points:

1. GERN seems like one of the only biotech companies which actually has a long-term, coherent strategy to attain the holy grail of biotech -- longevity. (immortality is often heard when talking about GERN). All of their actions are based on that one goal.

Yes, that is true, which is why they could be big. However, investing in Geron at this point is like investing in Charles Babbage with an intent on reaping the benefits of the web. (Babbage was an early 1800s mechanical computing machine pioneer.) There is a considerable amount of work and no guarantee that it is Geron which will ultimately benefit, nor any real way to see how it will develop with regards to the biotech sector.

However, that is not a reason not to invest, just a reason to be on top of your stake. (Does that count as a double negative?) Xerox invented the graphic user interface in the early 70s, but I'll bet you did better if you bought into Apple when they released the Mac. Likewise, remember Visicalc? Groundbreaking concept of a 'spreadsheet' for a computer, gave every business a reason to put a PC on each desk, but Lotus killed them and took the credit, and IBM and Apple benefited from the hardware sales. How will Geron fit into the picture?

2. Their patents to telemorase (the "immortality" enzyme),

Telemerase is not necessarily the immortality enzyme, contrary to the crap that appears in the newspapers and the popular press. It is implicated in the regulation of cell reproduction -- however, research also shows that adding telemerase can help create "immortal" cell lines, which is key to creating tumours and cancerous cell lines for lab study. While telemerase may be important for extending life 20 to 50 years from now, in the short term I'd expect more connections to oncology research. Remember, just because your cells can reproduce over and over without dying off, doesn't mean you stay eternally young, it just means you end up with too may cells gone wild. Geron will need to get involved with research on apoptosis (programmed cell death) if they want to work on some futuristic anti-aging program.

3. nuclear transfer (also known as "cloning")
Cloning research is here to stay, however with the popular back-lash against it in Europe and to a lesser degree in the US, legislators will play an increasing role in the rate of cloning research. That makes it a slightly more risky investment since policy decisions will effect corporations' abilities to benefit from the research. If Geron sticks to the sheep work that Roslin was doing before Geron got involved, they should be okay, but Geron's corporate history seems to be one of act now, spin the press release later, and if they mess around with human cells they are going to be a lightning rod for trouble.

4. stem cells (cells which can become any differentiated cell in the body, from brain cell to heart cell to skin cell)

One of the more risky research areas to be in. Stem cell research related to oncology and HIV, such as collecting them from the bloodstream to culture and put back in (see the machines that Nexell Therapeutics manufacture, www.nexellinc.com) has a short term payoff. Geron's work with stem cells is a bit more on the edge, looking at the development and differentiation process, and they have drawn fire for using harvested viable cell material and for creating viable cultures in the lab (essentially creating life to use as a donor in the eyes of many). Again, many many benefits to the research, but an area that will draw increasing watch-dog action from legislators and from ethicists and concerned citizen groups, plus if not done carefully, a lightening rod for trouble. Enough stories about creating "slave bodies to harvest for organs", no matter how bogus the stories are, and that avenue will be shut down

5. At less than 1 billion dollars, GERN has not been too badly run up, and as soon as some momentum grows, watch out.

Considering their revenue stream, is a billion dollar market cap justified? They are a research shop which may generate some great discoveries, but seems to be a few years away from any meaningful licensing agreements or milestone payments.

6. More importantly, GERN has a vital strategy and a great story that people can understand.

The hardest part to evaluate. Geron is really reaching for the gold and are working with concepts that can generate a lot of interest, so it is conceivable that one day they could outdo the CRAs and HGSIs for investor interest. But part of that great story that people can understand are a few issues which are awfully close to ethical and religious topics that could just as easily cause trouble for those invested in them.

I for one can't see which way it will go. That's why it probably isn't a bad idea to get a small stake in just in case. They will certainly generate some interesting research and investor interest over the coming years. I just don't think this company is one in which just looking at the financials will tell the whole story.

So, ElricSeven, your task, when you've finished with the clinindex on the pipeline, is to figure out a way to assess bioethics and legislative risk. Cell Therapeutics, Geron (don't they own Roslin now? if not add them to the list), any others?

Digger65

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