AEterna Zentaris (AEZS) has long been a favorite of mine among the low-flyer oncology stocks. Boasting a pipeline that is more than a one-trick pony, it is undeniable that market attention is fixed on the outcome of Perifosine.
Whether Perifosine will be approved is unknown to mere mortals, but AEterna investors are cautioned to read the negative criticism along with the positive. Clearly Keryx (KERX) has captured the market's nod on a potential run-up before news that could either result in a pop to double-digit land or a plunge that will have investors running to the hills. On the flip-side, I perceive that AEterna's pre-news run-up has been modest and on any hint of good news. I think a day-trader could see a sudden run towards $3/share.
The thing about pennyland biotechs is to maintain your head and don't risk more than you're willing to lose. AEterna has more than one oncology drug in the pipeline which could mitigate against a disastrous fall, but on Perifosine's failure, I could see the stock briefly falling below $1/share before recovering. On the other hand, on Perifosine's success, I could see the stock doubling overnight and testing the $4-6/share range.
Opinions and rumors on the web are just that: opinions and rumors. I would do well to remind AEterna investors of BioSante's (BPAX) CEO who basically boasted about LibiGel leading some to think it was a 'slam-dunk'. Well, it was hardly a slam-dunk; more like a slam-bam and the aftermath for the pps was as ugly as it gets as the stock has fallen below $1/share.
How you play AEterna shouldn't be influenced by stock boards or infamous writers. Personally, I like the odds of Perifosine, but I could also be dead-wrong. I find this is always the most difficult part of biotech investing: you are told so much, and you are told so little. The FDA doesn't review stock boards, it reviews scientific data. All the well-wishing in the world won't get a drug approved and the odds of approval are steep.
For under $2/share, I think AEterna is a reasonable risk for the potential of a hefty profit, but I think an investor should be ready to lose 50-70% should it fail. A long-term position may increase the investor's risk of failure with the near-immediate term of a big pay day. I actually favor the short-term investor who plays the run-up, then buys or holds what he/she is willing to lose.
Disclosure: I am LONG (BPAX). Investors buy and/or sell at their own risk. After 72 hours of publication I am free to buy and/or sell any stock mentioned in this article according to SA policy.