AEterna Zentaris: The Very Best Biotech Under $2

| About: AEterna Zentaris, (AEZS)

Recent downward volatility confirmed what I muse the market is ready to get behind should the sun ever peek out from the behind the present global malaise. As investors may have noticed, the field of quality biotech stocks is narrowing and with the market upheaval, cash flush investors are carefully measuring where to buy.

Investors are nervous and for good reason. Yet this could be another March 2009 moment to dip your toe in a biotech company that is constantly brought up because it seems to be a potential ticket to the triple digit moon. Which is why for under $2/share, I favor the one and only: AEterna Zentaris (NASDAQ:AEZS). Why I narrowed it to one, not two, not three, is because AEterna Zentaris stands out. The rest of the field under $2/share is mediocre. AEterna Zentaris is not. AEterna Zentaris is the very best biotech under $2/share. Here's why.

At $1.71/share on Friday's close, AEterna Zentaris has demonstrated a bullish resilience after the market took a nosedive in recent weeks. If the market weren't so bearish, I am convinced AEterna Zentaris wouldn't be a penny below $2.25/share. The completed February 2011 ATM draw-down may have negatively affected the share price, but the outcome is justifiable: "Cash, cash equivalents and short-term investment totaled $49.6 million as at June 30, 2011. With the aforementioned ATM drawdowns that were completed subsequent to quarter-end, the Company's pro forma cash, cash equivalents and short-term investment at June 30, 2011 would total $53.8 million."

The oncology and endocrine therapy research and development firm is holding a handful of pipeline cards that would make any astute investor salivate. For example, investors recently learned that patient recruitment for the ongoing phase 3 clinical trial with Perifosine in refractory advanced colorectal cancer is completed. Perifosine has both Special Protocol Assessment and Fast Track designation from the FDA and in July the company garnished its portfolio with a key patent from the European Patent Office, good until July 2023. Meanwhile the company has an amazing portfolio of drug candidates including AEZS-130, an oral diagnostic test for Adult Growth Hormone Deficiency. With phase 3 completed, the company hopes to file the New Drug Application in the near future. The entire pipeline is just as easily studied on the company's website.

AEterna Zentaris, despite its heavy cash burn (expected for a research and development oncology firm), generated $6.5M in revenues in Q2 thanks to increased orders for Centrocide. In Q1 2011, the company reported $7.39M in revenues. Though not enough revenue to support the company's liabilities, it has no doubt allowed the company to forge ahead with its deep portfolio.

Of course, the stakes are high particularly regarding Perifosine's success or failure and for its collaborators Keryx (NASDAQ:KERX), Yakult Honsha (Japan), and Handok (Korea). Nevertheless, pro or con, the individual investor will have to make his/her own determination as to whether Perifosone merits one's hard-earned investment dollars. I venture depending on the market's direction, AEterna Zentaris could be a great short-term hold bought on the dip and then later sold. And if the investor becomes convinced that Perifosine will meet with a positive decision from the FDA, it could become the kind of stock the retailer tucks away for a long-term hold.

The key here is identifying only the very best biotech stock under $2/share. It's my view AEterna Zentaris is that stock. I would advise investors to peruse an earlier year article written by Jeremy Richards. There is considerable interest in AEterna Zentaris (see here for another Richards article) and that too convinces me to follow this stock very closely.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.