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Geron Corporation (NASDAQ:GERN) is likely to be back in the headlines this week as the company gets ready to submit its ASH abstract. That precedes what we believe is going to be a second for-better-or-worse binary big day for the stock a month later at the conference when it will present a more granular view of its much-anticipated IMbark data. As you may recall, IMbark was the center of a collaboration and licensing agreement with JNJ’s Janssen that was curtailed at the end of September.

Shares of GERN were smashed as a result of the diss. The partnership was meant to support non-dilutive funding of the company’s primary asset, imetelstat, a telomerase inhibitor for the treatment of hematologic myeloid malignancies. Without Janssen, the market has assumed that the path forward would likely be far more dilutive. In addition, so goes the assumption, JNJ likely backed out because it has already seen the data we will gain access to at ASH (the American Society of Hematology Annual Meeting and Exposition. December 1-4, 2018. San Diego, CA.).

Geron Corporation (NASDAQ:GERN) may see a reaction to the abstract submission process simply because of the following narrative (our framing, but you will hopefully get the point): ASH data on IMbark will tell a story.

And right now, we know it will be either Story A or Story B.

Two Stories

Story A: Janssen and JNJ ditched the CLA because the data for IMbark was clearly a non-starter for the drug. They saw there was no hope of bringing it to market as a blockbuster new direction for cancer therapy (which was always the point of the CLA involvement – that type of potential). And, so, upon seeing the trend in the data, the partnership was ditched.

Story B: Janssen and JNJ ditched the CLA because, while it was an extremely difficult decision, the management team saw slightly more risk to maintaining that partnership because of a portfolio construction concern and another major opportunity that it preferred. The data from IMbark, while showing some promise, did not demonstrate enough security in its potential conclusions to justify avoiding a new funding deal with another drug that it believed may ultimately have more promise.

As we see it, if the story is “Story A”, GERN is pretty much done. Imetelstat is the one hit of a one-hit wonder. That’s not a controversial idea. Longs and Shorts both know this.

However, as we have outlined, there is a reasonably strong chance that the story is actually “Story B”. Big programs like Janssen operate almost like hedge funds. Just because a stock was sold doesn’t mean it is going to go down. It simply means the risk/reward ratio seemed more favorable for another opportunity of a similar profile. And a hard choice was made.

Story B would conceivably mean a big bounce for the stock because, while development could be more dilutive, the idea of a market opportunity down the line for imetelstat would be revived. And it’s such a unique asset that the market would have to appreciate the long-run earnings potential of the drug as potentially very high. In addition, going it alone, rather than with JNJ backing, would mean the reward for GERN shareholders would theoretically be much, much bigger.

So, there remains some drama here. And the abstract submission this week will go some of the way to granting insight into which story is being written here.