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Successful investors in development-phase small pharmaceutical companies have some of the toughest research to do among individual investors. They often spend a great deal of time thumbing through periodicals, clicking through websites and gazing at the pages of information at their disposal to perform their due diligence. After all this research, they still are often hit with such negative catalysts as poor phase 3 data after what appeared to be very promising a promising phase 2 trial, or even more devastating regulatory rejections or delays in the form of FDA complete response letters (CRLs) or rejected new drug applications (NDAs). Regardless of the research and luck involved, virtually every pharmaceutical must deal with the inevitable negative event that will rear its ugly head either expectedly or unexpectedly, the stock offering.

Development-phase companies are those in early stages of development that have not yet reached a point of their progression in which they have a marketed product and must spend their capital performing research and development or developing their business model. While some high-profile and particularly promising companies may garner enough government grants, institutional investors or larger pharmaceutical partners to avoid the dilutive effects of the offering of additional shares, most must tap into the authorized shares to increase the number of shares in the float in order to fund its operations. Depending on the terms of the offering and associated warrants, the announcement of the offering may have a minimal or a substantial effect on share price as frustrated investors close their positions or company shares sold in the open markets drive down the share price due to the supply versus demand concept. While these offerings may dilute the value of existing investors' holdings, the oft-reduced share price following an unexpected or unfavorable offering may make good entries possible for new investors. Although not always the case, research into cash burn rates prior to the offering can be utilized to ascertain how long the newly-found funding could last and give the new investors a better idea of the company's longer term financials.

Presented is a development-phase pharmaceutical which had a devastating year behind it and a recent stock offering that may make for a good entry due to current share price and upcoming catalysts that should keep investor interest (and therefore share price) elevated. Interested investors should more closely research the company and consider its financials, pipeline progression, targeted patient populations and clinical data before taking an opening position in this development-phase pharmaceutical.

AEterna Zentaris (NASDAQ:AEZS) shareholders have had a difficult year with much disappointment in the company's clinical program. Starting the year off at an adjusted-for-split $9.18, shareholders enjoyed a nice run to a closing high of just under $13.00 in March in anticipation of topline results from its phase 3 trial of Perifosine for refractory advanced colorectal cancer. The trial was being conducted by its North American licensee partner, Keryx Biopharmaceuticals (NASDAQ:KERX), which was also enjoying a bullish chart for Q1 2012. Shareholders from both companies would soon be devastated as the shares from each came crashing down with an April 2nd press release announcing the trial did not meet the primary endpoint of improving overall survival versus capecitabine + placebo. Afterward shares would trade low enough to necessitate a 6:1 reverse split implemented on October 3rd in order to regain compliance with NASDAQ's listing requirements. Although not generally considered as a positive move, it was the "lesser of two evils" as it did keep the company's common shares from being delisted and likely trading on the OTCBB in the near future. Unfortunately, the ride down wasn't over for shareholders as a subsequent stock offering announced after markets closed on October 11th for $16.5 million for $2.50 per share, a 20% discount to the previous day's close, forced shares down again from the closing price of $3.12 on the 11th to close at $2.43 on the 12th. Frustrated shareholders, a general negative outlook for the markets, and bearish postings on multiple forums and social media have pushed the share price down to currently trade at $2.10 with a market capitalization of $53 million at the close of the markets on Monday.

As devastating as the year has been for existing shareholders, new shareholders may begin finding interest in AEterna with financing out of the way, a share price just high enough to likely keep reverse split thoughts out of the way, and upcoming catalysts for the company. On September 26th the company announced that it intended to submit a new drug application (NDA) "early next year" for its lead product candidate, AEZS-130. The candidate is a diagnostic test for Adult Growth Hormone Deficiency (OTC:AGHD), a condition that affects 35,000 adult Americans, with 6,000 additional adults diagnosed each year. AEterna has also made a couple of recent announcements indicating that its development program is back in action, despite the huge setback in the late-stage Perifosine failure. On November 8th the company announced a presentation in which it presented proof-of-concept data for disorazol Z cytotoxic conjugates, like its AEZS-125 therapy, in ovarian cancer mouse models at the 24th EORTC-NCI-AACR (NYSEMKT:ENA) symposium on "Molecular Targets and Cancer Therapeutics" in Ireland. Although only preclinical research, the announcement does give another possible upcoming catalyst in the form of a future phase 1 trial for the therapy in humans in the future and also reminds current and interested shareholders that its R&D engine is alive and well.

Monday the company announced that it had initiated its phase 2 trial of AEZS-108 for patients with castration- and taxane-resistant prostate cancer (CRPC). Phase 1 results were promising with data indicating that the therapy was well tolerated and demonstrated early activity of antitumor responses in men with CRPC. The primary endpoint of the phase 2 trial will be a clinical benefit which is defined for this trial as non-progression of the disease at 12 weeks with no dose limiting or other side effects requiring early termination of the treatment regimen. Secondary endpoints include toxicity, time to response evaluation criteria in solid tumors (RECIST) and prostate specific antigen (NYSE:PSA) progression, RECIST response rate for patients with measurable disease, PSA response rate, pain palliation, and overall survival (OS).

With 2012 now waning, existing and new shareholders are hoping for a much better year ahead in 2013 for AEterna. Interested investors are advised to perform their own risk assessment to determine if and what type of positions they may consider to open in AEterna's oversold shares. With only one marketed product, Cetrotide®, a hormone-releasing hormone (LHRH) antagonist treatment approved for in vitro fertilization, the company is largely a development phase entity. Perifosine's late-stage failure was a devastating blow for the company with much time and money lost in its development. However, the share price plummet due to its failure as well as the subsequent stock offering soon after the reverse split could pave the way for a brighter 2013 ahead. Many negative concerns often associated with development phase small pharma are now out of the way for the interim: a stock offering, delisting concern, a reverse split, and late-stage drug failure. A new infusion of "fresh" shareholder money and a multitude of possible upcoming catalysts may prove to be a good investment going forward. According to the company's pipeline, it has four drugs in phase 2 development for multiple indications, each allowing for potential catalysts in the coming days, weeks and months. The company will be announcing Q3 earnings today after markets close and will hold a conference call tomorrow morning at 8:30 EST to give a corporate update. Interested investors are advised to perform research on the company prior to the webcast in order to more fully understand where the company and its common shares could be heading in the coming months. Those interested may access the live webcast via AEterna's website at www.aezsinc.com in the "Newsroom" section, or by telephone using the following numbers: in Canada, 514-807-9895 or 647-427-7450, outside Canada, 888-231-8191. Of particular note, investors should be listening for updates on the company's pipeline, including the NDA for AEZS-130. Additionally they should review the cash burn rate and ascertain how long its cash position should hold out with the additional $16.5 million it just obtained from its most recent offering. Lastly, they should listen for any changes in the partnerships of its therapies in development, more specifically those with Yakult Honsha, Handok, or Hikma.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AEZS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.