By Brian Wilson, Lead Contributor
Thursday, 03 January 2013 08:06
2012 was not a very good year for AEterna Zentaris (NASDAQ: AEZS) – particularly after the failure of its old flagship drug perifosine.
As you may recall from their press release issued on April 2, 2012, the company reported top-line data from the phase III X-PECT trial which showed that perifosine-treated patients could not demonstrate significantly significant improvements in overall survivability versus patients who received capecitabine and placebo.
This new left the once promising drug dead in the water, and also destroyed AEterna Zentaris stock. Recall that AEZS dropped from $12.84/share on March 30th to $4.38/share on April 2nd (-66% in one trading session) . Keryx Biopharmaceuticals (NASDAQ: KERX), a partner that actually conducted the trials for perifosine, fell from $4.98/share to $1.74/share in the same time frame (-65%).
AEterna Zentaris struggled immensely to regain investor confidence after the event, and also had to grapple with the fact that it was trading below $1/share for months. Had the company not performed a reverse stock split in early October 2012, they would have been delisted from the NASDAQ. Although I think that the reverse stock split caused some damage to the company’s reputation, we are heading into a new year and investors may shift a bit more attention to what’s left of AEterna Zentaris’ pipeline.
As of now, the company has two compounds that are exciting enough to warrant investor attention. One is AEZS-130 (macimorelin), which is orally taken ghrelin agonist. Ghrelin agonists promote ghrelin, which is a growth hormone produced by stomach cells that has a few useful effects like appetite-regulation. AEterna Zentaris is developing their ghrelin agonist as a diagnostic in adult growth hormone deficiency and as a treatment for cachexia.
AEZS-130 is already quite far into development as a diagnostic tool, having performed a successful phase III trial that concluded in 2011 that showed statistically significant results in terms of diagnostic efficacy. The NDA is expected to be submitted very soon – probably in Q1 of 2013. Although this will certainly help investors forget about perifosine and the general ugliness of AEZS in 2012, I think that AEZS-130’s development as a treatment for cachexia is far more interesting.
Cachexia is a general wasting of the human body as a result of weak appetite and general unhealthiness for patients with more serious maladies like AIDS and cancer. Patients undergoing chemotherapy in particular are prone to have trouble with eating, as they have virtually no appetite despite the obvious need for their bodies to repair cell damage. There aren’t any mainstream cachexia treatments at this point, so there is investor hope that AEZS-130 might be able to find some potential in this niche market.
The other compound to watch is AEZS-108 zoptarelin doxorubicin), which is being developed as a treatment for a wide variety of cancers and doesn’t really target a niche market(s) like AEZS-130. Doxorubicin is a very common chemotherapeutic agent that is effective in cancer cell destruction, but AEterna Zentaris adds its own twist by binding it to zoptarelin, which is a synthetic peptide carrier. The idea is that the peptide carrier brings AEZS-108 specifically to tumor cells that are LHRH positive (lutenizing hormone-releasing hormone). This hypothetically brings more of the doxorubicin to cancer cells instead of healthy cells, which could improve efficacy of a doxorubicin chemotherapy round while reducing side effects.
The takeaway here is that 2012 was a very bad year for AEterna Zentaris, but 2013 might turn things around - to an extent. The market capitalization is quite low at the moment at $64 million, and it’s certainly worth noting that AEterna Zentaris was granted special protocol assessment by the FDA for phase III development of AEZS-108 for Endometrial cancer. This means that we could see AEZS-108 on the oncology drug market well before the final completion of its phase III trials, which would provide the company with some much-needed revenue and investor interest. On top of the likely NDA submission for AEZS-130 early in the year, you can see that speculation might drive the stock higher in coming months.
Sentiment: Strong Buy
AEZS may surprise us by finally keeping to its promise and starting AEZS 108 Endometrial P3 in the first quarter. A partnership with a $100m+ down payment is quite possible, and will do wonders to the stock price.
Though the author writes off Perifosine, I think Perifosine for MM will be the sleeper hit. From the last presentation, we will get to know the early results in April first week.
So there will be no negative news this quarter, two very likely big events (130 NDA submission, starting 108 P3 trial), one quite probable and extremely positive event (partnership for 108) and a highly speculative event at the end of quarter. I see an easy double (with very little risk) for anyone buying now and holding until before the Perifosine results.
Sentiment: Strong Buy