This article was originally published in the Friday File for the Irregulars on November 6, and a nearly identical ad is now circulating. The article has not been updated, but the stock is essentially unchanged in price.

The letter, which is an ad for The Wealth Advisory, edited by Steve Christ, teases us about a buyout candidate biotech company, first making the argument that the market is hot for little research firms and that big pharma is thirsting after their drug candidates to fill in depleted pipelines …

“Earlier this year, a four-year-old Massachusetts-based biotech company with just 60 employees was bought out by a pharmaceutical giant for $720 million.

“Nearly a quarter billion for a company that didn’t even have a product on the market.

“It’s just one of a number of such eye-popping buy-out deals that have been sweeping the biotech sector….

“In the next few minutes, I’m going to tell you about Big Pharma’s next big prospect… the company for which my colleague Steve Christ is guaranteeing 66% gains… at a minimum.

“And I’d like you to see exactly what this aggressive buy-out campaign can do for your bottom line.

“How Big Pharma ‘Shake and Bakes’ Research and Development

“Right now, the market for biotech startups is at an all-time high.

“Companies that you’ve never heard of that are on the verge of major breakthroughs… selling for BILLIONS.”

Now who wouldn’t love that? Nothing like a nice big buyout at a huge premium to put a smile on the face of any investor.

So what is this biotech stock? It’s targeting cancer, which is always a way to get attention from investors (and, of course, make a big difference to public health) …

“Its goal has been one of the most elusive in all of medical history.

“In short, this company is working towards…

“Killing the Killer: Could Cancer’s End Be In Reach?

“According to the American Cancer Institutes, it cost the American economy $228.1 Billion in 2008…

“…As it took 565,000 American lives.

“Its death rate has gone virtually unchanged since 1950.

“And over the next decade, 6 million more American families will feel the loss of a loved one to cancer.”

Sooo … which cancer-fighter? Some clues about exactly what their drug does …

“A Technology That Can ‘Order’ A Tumor…

“To Shrivel Up And Die

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“The technology was made possible by the discovery of an enzyme called telomerase.

“When this enzyme is overproduced, cells divide indefinitely without aging…

“And it’s this uncontrolled cell division that creates malignant tumors… cancer….

“Truth is for this biotech company, the cure for cancer may be just the beginning.

“That’s because the company that figures out how to manipulate telomerase with reliability… will have the world’s population in its hands.

“Not only will they be able to make cancer cells wither and die…

“It will also slow down the aging process of healthy cells.

“And that’s exactly what this company is perfecting today.

“It’s pioneering the science of regenerative medicine… by literally creating new tissue. (This is the same company that developed a spinal drug that allowed paralyzed rats to walk once again.)

“Right now, their new generation of anti-cancer drugs is in Phase 2 trials. And a major pharmaceutical company is highly interested in the technology.”

So those are some decent clues … but we also get some clues about the stock itself:

“The value of this stock has been rising — slowly but steadily — since early on in the buyout boom.

“But just recently, the number of call options has shot up dramatically…

“…With the January call volume growing to over 10 times that of November’s.

“If these options investors are right, the price of the stock will rise 66% in the next three months alone!

“Making it one of the hottest — yet one of the most classified — stocks in the biotech market today.”

And they also included a chart of the stock’s movement over the past year, which is part of the reason that I can confidently say that this stock is …

Geron (GERN)

Geron has been alternately a punching bag and an investor favorite over the last ten years, probably not surprising for one of the biotech pioneers in stem cells. They were the first company to get permission for human trials using embryonic stem cells back in January, and they do indeed have a “cure for cancer” drug in Phase 2 trials, that’s the Telomerase Cancer Vaccine GRNVAC1. That’s their most advanced “drug” right now, which is part of the reason that Geron always looks kind of cheap relative to the potential of their markets and the novelty of their technologies: They area a loooooong way from marketing any of the drugs in their pipeline.

And back in 2005-2006, they were involved with the high profile spinal cord studies on rats that showed stem cells returning movement to extremities, though that part of their work seems snake-bitten, too, given the almost constant promise that stem cell solutions for spinal cord injuries are always “just a few years away.” (The latest news on that is that they’re “re-initiating” the spinal cord stem cell trials after the FDA had put them on hold for a couple months.)

And they do have a pretty high number of call options outstanding for January, open interest overall (that’s the number of contracts) is about twice as high as for November or December, though Geron, as a volatile, news-driven biotech of decent size, almost always has pretty good options volume.

I’ve sniffed around Geron before but have never owned the shares, they’re a good-sized company (market cap of about $500 million, with a third of that in cash and no debt), and they are doing some cutting edge stuff that might be hugely profitable … but, of course, it also might flop. Interestingly, Geron is also part-owner of the livestock cloning company, Viagen, which uses some of Geron’s technology.

Geron may be moving as part of the general search for buyout candidates in mid-size biotech companies, but it’s also traditionally been the “stem cell” play — whenever stem cell news is big, as with Obama’s endorsement, or the embryonic trial release, the shares shoot up, whenever other flavors lead the biotech menu, Geron’s stock tends to be pretty quiet thanks to the fact that their treatments and compounds are so very far away from reality. The only large companies that I know have significant relationships with Geron are GE Healthcare and Corning, but it might be that they have relationships with other big pharma firms, or that the pharmas are sniffing around, too, but that probably depends on steps forward in the science, too, the rumors of Geron buyouts have come around before and led to not much.

Part of the problem with being on the “cutting edge” is that it’s really hard to predict — as with this latest hold on their stem cell trial, which ended up being mercifully brief — whether or not the drugs will follow typical patterns and timelines in getting approval from the FDA. There are always hiccups for new classes of drugs, especially from what has been an extremely cautious FDA in recent years.

So is Geron “classified?” That’s a hard claim to make — I’d say it’s the highest profile stem cell company out there, and it’s actually one of the few that is big enough to have options trading and analyst coverage, since so many of these firms are little OTC or pink sheet operations (not to say they’re frauds, just that they’re tiny). And of course, the Telomerase drugs and vaccines sound promising, but they also sounded promising a couple years ago — GERN has traded down as low as $2 and as high as $9 or so this year, and I can’t say that I would argue with either price, but here in the middle of that range is as worthwhile a place as any to start looking at them.

And they’re participating in at least a half dozen conferences and symposia before the end of the year, and at least one investment conference, so it would appear that the options traders will have plenty of material to parse for catalysts in the months ahead — the big trading in January call options could be a bet on news coming out before late in that month, or it could just be a bet on a buyout, since buyout rumors are bouncing around for lots of biotechs these days. As to whether Geron would need a buyout or a cash infusion, they seem to be reasonaly OK for now — they’ve been spending money at a pace of about $70 million per year in 2009, and the trials they’re operating are likely getting more expensive as they advance, but they do currently seem to have enough cash to keep that going for another year or two.

So there you have it — yet another way to play cancer and stem cells (the most recent conversation we had about the broader stem cell topic, by the way, was for that Patrick Cox teaser that never seems to go away, I wrote about it most recently here). Geron is not a hidden stock like some of the teensy $50 million companies, but it’s still small enough to be swallowed, and still certainly unprofitable and going to be unprofitable for years unless they sell a major drug or get bought out — but that’s common to most of the small biotechs.