PropThink: Aeterna Zentaris Up on Rating, Value Drivers into Next Year

Thu Sep 20, 2012 12:27pm EDT

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By Jake King

Shares of Aeterna Zentaris (NASDAQ:AEZS) are strong Thursday morning after a Buy initiation from Roth Capital with a $1.75 price target, more than double its current valuation. The optimism is based on a series of catalysts for the company that extend into the first quarter of next year. First, AEZS will be applying for a Special Protocol Assessment of its endometrial cancer candidate, AEZS-108, in the next few weeks, and plans to begin Phase III testing before the end of the year. The company also applied for Fast-Track Status in July for AEZS-130, an Adult Growth Hormone Deficiency (AGHD) diagnostic that the company is preparing for a New Drug Application (NDA). With a 60-day timeframe for decisions on Fast-Track Status, an NDA should be submitted in full by the first quarter of 2013. The chance of an accelerated submission process is high, as there is currently no approved AGHD diagnostic in the U.S., and the product has already received orphan drug status from the FDA for AGHD diagnosis. 

The most substantial value-driving catalyst for Aeterna Zentaris, however, will come in the first quarter of next year. Interim data from a Phase III trial of the company's lead product perifosine, for the treatment of Multiple Myeloma, will be announced early next year. Perifosine failed an earlier Phase III trial for metastatic colorectal cancer in March, but it is not uncommon for oncology products to perform well against one cancer, and not another. Data from earlier Phase I/II studies in the Multiple Myeloma indication were promising. Following the failure, a licensing agreement with Keryx Biopharmaceuticals (NASDAQ:KERX) was cancelled, further pressuring shares but restoring full perifosine marketing rights to AEZS.  The upcoming events provide a series of value-driving catalysts for AEZS with limited downside risk after major losses in March. Aside from perifosine, the market is discounting AEZS' pipeline and the company appears undervalued following the declines earlier this year.

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Disclaimer:

You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relationships(collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. In connection with AEZS, PropThink has taken a long position and  stands to realize significant gains if  the price of AEZS appreciates. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation.  To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. You should be aware that a shareholder of PropThink is a consultant to Aeterna Zentaris and receives a monthly retainer as compensation none of which is shared with PropThink. Neither the opinion expressed herein, nor PropThink`s position, is influenced by this relationship. PropThink was not compensated to publish this article. Our full disclaimer is available at http://www.propthink.com/disclaimer.

 






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