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The biotechnology industry is typically risky. The below listed names are no exception, but we think investors should give the names a closer look because they count notable smart money investment funds among their shareholders. While hedge fund ownership is not itself a sufficient reason to invest in a stock, interest from these successful funds should provide at lease a modest justification for additional investor due diligence.

AEterna Zentaris Inc (NASDAQ:AEZS)

Notable Shareholders: D.E. Shaw & Co, Renaissance Technologies LLC

This Canadian based biotechnology company develops late-stage oncology drugs. Research primarily focuses on ovarian, colorectal, endometrial cancer and multiple myeloma. The company has gained attention because it is part of a growing trend to offer "personalized medicine" with patient specific treatments.

AEZS has an interesting pipeline for a relatively small public company. The company currently markets Cetrotide (In vitro fertilization) through a partnership with Merck Serono and Nippon Kayaku. It has Perifosine (colorectal cancer, multiple myeloma) and AEZS-130 (diagnostic in Adult Growth Hormone Deficiency, "AGHD") in Phase 3 trials. It has Perifosine (multiple cancers) and AEZS-108 (endometrial, ovarian, prostate and bladder cancers) in Phase 2 trials. It has AEZS-112 (oncology) and AEZS-130 (Ghrelin agonist and cancer cachexia) in Phase 1 trials. Finally, it also has AEZS-120, AEZS-129, 131 and 132 as well as AEZS-123 in Preclinical trials.

Like many other stocks in this industry, AEZS is a high risk, high potential return stock. The company's stock price will be largely dependent on the results from the Phase 3 Trials. Among other things, the company intends to complete Phase 3 study of AEZS-130 as a diagnostic test for AGHD and will file a New Drug Application ("NDA"). The company also expects to report results for Phase 3 X-PECT trial in colorectal cancer.

In 2010, the company had revenues of $27.7 million and a net loss of $23.2 million. This compares with $63.2 million in revenues in 2009 and a net loss of $24.7 million. At the end of 2010, the company had $32 million of cash and cash equivalents. The company's cash position will cover around 1.5 years of accrual based losses at the 2010 levels.

Cadence Pharmaceuticals (CADX)

Notable Shareholders: Wellington Management Company LLP, Capital Research Global Investors
The company's main product is OFIRMEV (acetaminophen) injection that it in-licensed rights from Bristol-Myers Squibb (NYSE:BMY) Company. This proprietary treatment is the first and only intravenous formulation of acetaminophen approved in the United States. In Europe, Bristol-Myers markets the same product under the trademark PERFALGAN. The US commercial launch occurred in January 2011. According to the company, there were 675 hospitals in the first 15 weeks of launch. Going forward, the company could see rapid, significant growth potential as US hospitals adopt IV acetaminophen. Unlike the European approach, which includes both IV acetaminophen and opioids to address pain, the US currently relies almost exclusively on opioids.

In 2010, CADX did not generate revenue and lost $56.64 million. In the most recent quarter the company reported revenues of $350,000 and net losses of $24.37 million as the burn rate accelerated. As of March 31, 2011, the company had cash and investments of $109 million.

Cadence's stock price peaked to $17 per share and dropped as low as $5 during the financial crisis before rebounding to current levels.

Dendreon Corp (NASDAQ:DNDN)

Notable Shareholders: SAC Capital Advisors LLC, Soros Fund Management LLC, Capital Research Global Investors

The biotechnology company has been one of the market's story stocks, rising from around $2 in March 2009, to around $40. Founded in 1992, Dendreon develops and markets treatments for various forms of cancer.

As of March 31, 2011, the company had cash, cash equivalents and investments that amounted to $956.597 million. During the first quarter of 2011, Dendreon had $28.061 million of revenues and $111.768 million in losses. Cash used in operating activities was $97.918 million. In 2010, the company had generated revenues of $48.057 million and net loss of $439.48 million. Dendreon's liquidity resources represent around two years of operations. This burn rate should prove to be conservative since PROVENGE sales are expected to increase meaningfully in 2011, following the FDA licensure of additional production capacity at the New Jersey, facility during the first quarter of 2011. Similar approval for the Orange County and Atlanta facilities are expected around mid-year 2011. PROVENGE is the company's only FDA approved drug and as such, the company's near term prospects rest almost exclusively on this drug's adoption.

Arena Pharmaceuticals (NASDAQ:ARNA)

Notable Shareholder: Wellington Management, D.E Shaw & Co Inc

According to the company description, Arena discovers, develops and commercializes oral drugs in therapeutic areas of cardiovascular, nervous system, inflammatory and metabolic diseases. The company's drug research pipeline includes Lorcaserin (weight management), APD811(pulmonary arterial hypertension), APD334 (autoimmune diseases), CB2 (osteoarthritis and pain) and GPR119 (type 2 diabetes). Lorcaserin is its most advanced drug candidate and as such the company's near term success is largely tied to their collaboration with Eisai (OTC:ESALF). This dependency on the drug is what caused the stock price's sharp drop following the FDA's rejection of lorcaserin in October 2010. If the company can successfully resubmit lorcaserin to the FDA this year, that should be viewed positively by the markets. Another possible positive catalyst would be if a more enthusiastic partner replaced the Japanese drug company Eisai, which may be losing interest in the weight-loss drug following recent setbacks.

In 2010, the company generated $16.61 million in revenues and $124.53 million in net loss. As of March 31, 2011, Arena had $119.86 million of cash and cash equivalents.

Sunesis Pharmaceuticals Inc (NASDAQ:SNSS)

Notable Shareholders: Royce Value Trust, Moore Capital Management, Bay City Capital

The company is focused on the development and sale of treatments for hematologic and solid tumor cancers. The company's lead product candidate, Vosaroxin is a first-in-class anti-cancer quinolone derivative ("AQD"). In December 2010, the company started enrollment for Phase 3 studies of vosaroxin in combination with cytarabine for relapsed or refractory acute myeloid leukemia ("AML") patients. The company will present the abstract of the adaptive design of the VALOR trial during the 2011 American Society of Clinical Oncology Meeting from June 3-7 in Chicago. This event has the potential to move the stock price.

In 2010, the company reported $33,000 of revenues and a net loss of $24.58 million. During the first quarter of 2011, revenues jumped to $4 million and earnings jumped to $1.84 million because of recognition of an upfront payment from Millenium Pharmaceuticals related to a new collaboration under which SNSS could earn up to $60 million in milestone payments. As of March 31, 2011, the company had cash and cash equivalents of $48.9 million.

Sunesis' recently collaborated with Biogen Idec (NASDAQ:BIIB), Millenium Pharmaceuticals (OTC:MNHG), Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK). These relationships are vital to the company's future success, but at some point they could also offer clues as to potential acquirers if the drugs trials continue to show promise.

Aastrom Biosciences Inc (NASDAQ:ASTM)

Notable Shareholders: Geode Capital Management LLC, Stark Offshore Management LLC, Millennium Management LLC

Source: 6 Speculative Biotech Stocks Smart Money Loves