It's no secret that Québec-based Aeterna Zentaris (AEZS), an oncology and endocrinology drug-development company, had an abysmal year in 2012. Aeterna's difficulties began in April with the failure of its phase III X-PECT trial of Perifosine for colorectal cancer, a product which it developed in partnership with Keryx Biopharmaceuticals (KERX). Aeterna enjoyed a brief rally in September before gloomy price-targets caused it to begin trading under $1/share. When faced with the threat of being delisted from the NASDAQ, Aeterna responded by performing a 6-for-1 reverse split stock. These events proved devastating on both share price and shareholder confidence. Fortunately, the end of 2012 saw Aeterna's downtrend finally flatten out as some good news arrived in the form of the FDA granting its AEZS-108 drug a Special Protocol Assessment ((SPA)).
An Abundance of Cash and Continued Operations
There are numerous signs that indicate 2013 could see Aeterna's fortunes change for the better. Firstly, Aeterna's equity offering in mid-October has increased its "Cash and Cash Equivalents" to approximately $48.4M. Given Aeterna's surplus of cash, its Q3 2012 quarterly filing states that it possesses "sufficient liquidity and financial resources to fund operations and capital needs for at least, but not limited to the next twelve months." This affords it ample time to further develop its robust product pipeline, of which there are seven clinical trials in either phase II or III.
Three Upcoming Milestones and Partnership Potential
Three products in particular possess significant near-term milestones - events scheduled to unfold within the first three months of 2013 that will play considerable roles in Aeterna's future.
Perifosine is Aeterna's phase III product candidate for the treatment of multiple myeloma ((MM)). The FDA has granted Perifosine the Orphan Drug designation and Fast Track designation for Multiple Myeloma - the second-most prevalent type of blood cancer in the U.S. The ongoing Phase III trial in MM is conducted under a Special Protocol Assessment from the FDA and positive Scientific Advice from the EMA. Aeterna is expecting interim analysis in Q1 of 2013. Chemotherapy drugs commonly used to treat myeloma include: cyclophosphamide by Bristol-Myers Squibb (BMY), Zavedos by Pfizer (PFE), and generically available Alkeran.
AEZS-108, currently in phase II of trials for endometrial cancer, is the first intravenous drug in advanced clinical development that directs the chemotherapy agent specifically to LHRH-receptor expressing tumours, resulting in more targeted treatment with less damage to healthy tissue. AEZS-108 has been granted orphan drug designation and a Special Protocol Assessment by the FDA. Endometrial cancer is the most common gynecologic malignancy and an area of high unmet medical need - approximately one in 30 women are diagnosed with endometrial cancer every year. Aeterna is expecting interim analysis of AEZS-108 in Q1 of 2013. Currently used in the treatment of endometrial cancer is a drug called Megace which is a registered trademark of Bristol-Myers Squibb and licensed to privately-held Par Pharmaceuticals, Inc.
Also taking place within Q1 of 2013 is Aeterna's NDA filing for AEZS-130 - a diagnostic test for Adult Growth Hormone Disorder (AGHD). While this event will not possess the same thrust as the Perifosine and/or AEZS-108 interim analyses, it is still worth keeping an eye on and could add millions in incremental value.
Given their advanced stages of development and the market potential that these products possess, the results from the interim analyses are going to be significant for Aeterna. Adding greater significance to the development of Perifosine, AEZS-108, and AEZS-130, is the fact that all three products are wholly-owned -- favourable results would surely encourage the discussion of potential partnerships.
In recent weeks, a number of equity research companies have upgraded their recommendation for Aeterna Zentaris to more bullish outlooks. MLV Equity upgraded AEZS shares to a "Buy" rating and currently has $5.50 price target on the stock. Zacks upgraded AEZS shares to an "Outperform" rating and currently has a $2.90 price target on the stock. Analysts at McNicoll Lewis & Vlak have also upgraded AEZS shares to a "Buy" rating. A look at overall analyst opinions reveals that the bullish outlook on AEZS is not held by everyone, but rather held by those who have most recently re-evaluated the company.
Aeterna offers a large cash surplus, several impending milestones, partnership potential, the recent bullish outlook of analysts, and a low price with minimal downside risk. With all of these factors in mind, it may be time for a second look at this rebounding biotech.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AEZS over the next 72 hours.