BOSTON - General Electric Co is joining forces with U.S. biotech company Geron Corp to develop products from human embryonic stem cells that could be used to develop and test new drugs.

Shares of Geron surged 17 percent in premarket trading on Tuesday on the news it was teaming up with the largest U.S. conglomerate, which has made expanding its healthcare operation a major strategic push this year.

Stem cells are the body's master cells, with the potential to grow into various types of human tissue, such as skin or internal organs.

Scientists say that research on embryonic stem cells, which are the most malleable, has enormous potential to develop treatments for cancer and other diseases.

But using stem cells derived from days-old human embryos has been intensely controversial in the United States, where opponents say the destruction of any embryo is wrong. The Obama administration in March lifted a Bush-era decision that had forbidden federally funded researchers to work with the cells.

GE and Geron said their research would use batches of stem cell listed on a National Institutes of Health registry, which would make the work eligible for U.S. funding.

This agreement marks a further step in GE Healthcare's cell technology strategy aimed at addressing the potential of stem cell applications in the drug discovery and therapy markets, said Konstantin Fiedler, general manager of cell technologies at GE Healthcare.

Fairfield, Connecticut-based GE will fund the research and manufacturing, and sell any resulting products, while Menlo Park, California-based Geron will provide its data on stem cells. They expect the first commercial products by next year.

The companies did not disclose financial terms of the arrangement.

GE, whose healthcare unit is best known for advanced imaging systems like CT-scan machines, said in May that it planned to invest $3 billion in research and development, with a primary focus on making its products less costly to buy and operate.

Geron shares rose 17 percent to $7.83 in premarket trading, while GE was up 7 cents at $11.83. (Reporting by Scott Malone in Boston and Esha Dey in Bangalore; Editing by Lisa Von Ahn)