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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