Aug. 27 (Bloomberg) -- Geron Corp. rose 3.6 percent in Nasdaq trading after saying a hold placed by U.S. regulators on its plan for the first human embryonic stem-cell study was due to “non-proliferative” cysts in test animals.

The Food and Drug Administration cleared Geron in January to test its stem-cell treatment in patients with spinal cord injuries. The Menlo Park, California-based company announced the regulatory hold on Aug. 18.

Microscopic cysts seen in an early experiment in a few animals that received the cell-based treatment, GRNOPC1, were found in larger numbers of animals in a recent study. The cysts weren’t linked to complications, the company said today in a statement. A more recent study of rats using a new batch of test chemicals showed no cysts, Geron said in the statement.

Stephen Brozak, an analyst with WBB Securities LLC in Westfield, New Jersey, said investors would be reassured that the animals didn’t develop a type of tumor known as a teratoma.

“I think it provides people with a reasonable explanation,” Brozak said. “Everybody was afraid of the T- word, teratomas, and it clearly wasn’t that.” Brozak has a “strong buy” rating on the shares.

Geron rose 25 cents to $7.18 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The shares fell 10 percent on Aug. 18 after the company announced the FDA’s hold.

To contact the reporter on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net.

Last Updated: August 27, 2009 16:10 EDT