Many investors are enthralled with stocks that have massive upside potential. It turns out that many of the companies that are said can double are in the biotech sector, and to say that most of them are risky would be the understatement of the year. One such issue would be in shares of Geron Corp. (NASDAQ: GERN). A research report from Janney’s Roy Buchanan issued on Friday included a $6.50 fair value estimate for the stock — more than 100% above the $2.70 share price of the time.

Before investors get overly excited here, it is important to understand that this was an updated call, and it is the same target that the firm had on February 26. This was also the same target as when the coverage was started back on December 16, 2016, when shares were closer to $4.50 at that time.

24/7 Wall St. would remind readers that Geron is a company that has had many great hopes and promises through time. Going back over a decade, those hopes and ambitions have been met with disappointment. The company is not forecast to have any significant revenues until 2017.

Another consideration is that the discounted cash flow estimates are based on financial projections out to the year 2027. Again, high risk. There is also the warning in this note that the catalysts are not necessarily coming any time soon.

Janney’s report showed that Geron ended its first quarter with $142 million in cash. That is said to be enough to fund the company through 2017 and the continuation decision by partner Janssen. Buchanan’s report said:

The two phase 2s for imetelstat are progressing according to plan, based on feedback from Janssen to Geron. 2016 should be a relatively quiet one for Geron, in lieu of an in-licensing/acquisition. Geron continues to search for assets. We don’t attempt to value or model an acquisition, given their inherent unpredictability. We do view imetelstat as a differentiated candidate for hematological indications and look forward to data in the second half of 2017 in myelofibrosis.

Janssen’s early acute myeloid leukemia (AML) data at the AACR meeting had a poster describing ongoing work with imetelstat in AML. It was said to be very early, but they also said that it showed some interesting activity in various patient-derived AML cell lines. Buchanan added:

The study looked at sequencing imetelstat with the epigenetic-modifiers azacitidine or decitabine, primarily based on data indicating lowering of telomerase expression by 5-AZA (Zhang X, et al. Oncotarget. 2015;6:4888-4900). We suspect that Janssen/Geron will examine combo studies of imetelstat depending on the results of the ongoing studies in MF and MDS, and maybe an AML study.

Again, the catalysts may not be this year. Janney’s report noted that 2016 should be quiet, although it doesn’t mean that it is unimportant. Geron discussed the studies recently, and Buchanan described this as follows:

As previously indicated, the company will not announce data from the internal reviews, but will of course disclose a meaningful change to either of the studies. For Imerge, if one dose is unsafe or ineffective, Janssen may drop the dose, and if both fail, they may select a new dose for part 2 of the study. The primary analysis of Imerge follows 200 pts being treated for 24 weeks (the N includes dropouts). As of late-April, more than 110 sites were active across the two sites, and this is close to the planned max number of sites. Janssen indicates that enrollment in the studies is “on track.”

As far as how the $6.50 fair value estimate was derived, this was the discounted cash flow through 2027 — discounted at 16%, with terminal value with 5% growth. The firm’s estimate is for a 64% probability of success for MF through Phase 3, 48% for MDS and 25% for AML. Still, they currently assume no AML development if both MF and MDS fail in Phase 2.

Geron has a market cap of $427 million, and the $2.70 share price compares to a 52-week range of $2.30 to $5.30.

What is interesting about this massive upside target is that this was far from the highest made in months prior. Oppenheimer used to cover Geron with a much higher target, but the firm dropped coverage earlier in 2016.

For additional background information, here is a late 2014 article signaling that Geron might be back from the dead — when shares were at $2.93, after a 30% pop at that time.

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