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After a rally in September, Aeterna Zentaris (NASDAQ:AEZS) has continued to see investors continue to sell the shares despite the general Street consensus that the shares are undervalued. A quick peak at analysts' targets suggests that the stock has substantial upside from current levels. The mean consensus target for the shares is just over $5.54 compared to its most recent price of $1.93, a healthy upside, to say the least. The company features a balanced pipeline with a solid combination of early and late-stage candidates. However, investors are continuing to penalize the company based on setback in one of its late-stage drug candidates, Perifosine, in April and ignoring the fact that the company has three late stage product candidates with a sizable cash cushion and catalysts upcoming early next year.

The back story begins on April 2 when the shares took a 66% haircut after the company announced that the Perifosine Phase 3 trial in refractory advanced colorectal cancer failed to meet its primary endpoint. Additionally, for the total intent to treat patient population, median overall survival was 6.9 months for the capecitabine + placebo (NYSE:CAP) group compared to 6.4 months for the capecitabine + perifosine (P-CAP) group. Median progression-free survival was 11.4 months for the CAP group compared to 10.9 months for the P CAP group. The differences were not statistically significant. There were 7 complete and partial responses in the CAP group compared to 6 complete and partial responses in the P-CAP group.

The results were obviously disappointing and the reaction in the shares was to be expected with such a highly-anticipated trial. Still, the sell-off on April 2 and the aftermath of the sell-off seem to be an overkill considering the company's late-stage product candidate portfolio, including Perifosine (other indications), AEZS-108, and AEZS-130.

Perifosine is the focus of investors as the interim analysis for the Phase 3 trial for multiple myeloma is expected in Q1 of 2013. The study is a follow up to Perifosine's Phase ½ data in multiple myeloma which was released in December of 2009. The study was a three open-label, non-comparative, multicenter Phase 1/2 studies were conducted with perifosine in combination with bortezomib (Velcade) which involved a total of 171 patients. Results showed a median overall survival of 25 months for all evaluable patients, including 30.4 months for 20 bortezomib relapsed patients and 22.5 months for 53 bortezomib refractory patients. Results also showed a median progression free survival of 6.4 months for all evaluable patients, including 8.8 months for 20 bortezomib relapsed patients and 5.7 months for 53 bortezomib refractory patients.

There are also three additional data points that add credibility to the trial. There were recently two recent analyst initiations of the stock, both touted the potential of Perifosine in multiple myeloma. Professionals involved with the company have put their dollars behind the company. On October 17, the company closed a public offering of the shares, with investors injecting the company with $16.5 million of fresh capital for the company to use for clinical trial purposes. On June 28, AEZS's Japanese partner in Perifosine, Yakult Honsha, initiated a Phase 1 trial in multiple myeloma with Perifosine in Japan.

The market for a successful drug in multiple myeloma is large. Multiple myeloma is the second most prevalent type of blood cancer in the US, representing close to 1% of all cancers. In 2014, it is projected that there will be about 180 thousand cases in the G7 markets.

Aeterna's number two product candidate by importance is AEZS-108 for endometrial cancer. The results for the Phase 2 trial were released about 2 years ago and an encouraging trend was observed in overall survival with limited side-effects. AEZS-108 achieved good rates of objective response and disease stabilization. Importantly from the patients' point of view, overall survival was similar to what has been reported with more aggressive and less well tolerated combination chemotherapy regimens. The phase 3 trial is expected to be initiated in the first quarter of 2013 with the company just recently filing for a Special Protocol Assessment for the trial.

Endometrial cancer is the most invasive gynecologic cancer in women with about 47 thousand new cases expected in the USA in 2012 and 36 thousand new cases in the European G5 countries in 2013. About 20% of the cases are recurrent. There currently is no approved drug product in the USA and most in Europe for endometrial cancer and therefore, there is a high unmet medical need in the area.

Lastly is AEZS-130 in growth hormone deficiency (OTC:AGHD) diagnostic and therapeutic. AEZS-130 is the company's most advanced product candidate still in development. The company expects to file a New Drug Application (NDA) for AEZS-130 during the first quarter of 2013. The favorable phase 3 results that the NDA is based on were released last year. The results show that AEZS-130 reached its primary endpoint demonstrating >90% area-under-the-curve of the Receiver Operating Characteristic curve, which determines the level of specificity and sensitivity of the product.

The parameters of the study were achieved as agreed to with FDA under its SPA. Importantly, the primary efficacy parameters show that the study achieved both specificity and sensitivity at a level of 90% or greater. In addition, 8 of the 10 newly enrolled AGHD patients were correctly classified by a pre-specified peak GH threshold level. The use of AEZS-130 was shown to be safe and well tolerated overall throughout the completion of this trial.

AGHD affects 35,000 adult Americans, with 6,000 new adult patients diagnosed each year. Growth hormone not only plays an important role in growth from childhood to adulthood, but helps promote good health throughout life. AGHD is usually characterized by low energy levels, decreased strength and exercise tolerance, increased weight or difficulty losing weight, emotional changes, anxiety and impaired sleep. Available diagnostic tests for AGHD are complex and can produce significant side effects.

Source: Aeterna Zentaris: Late-Stage Drug Candidates Could Send Stock Higher