We've all heard stories about both people and companies that became overnight successes. In reality, if you dig just a little deeper you generally find they struggled for many years, even decades, but they struggled at times when few, if anyone was watching.
AEZS has certainly struggled, even though it's developed one approved product and has a second that should be approved by next year. Many struggling biotech's have spent as much or more time and have nothing whatsoever approved, yet may have larger market caps.
While the new CEO may be the answer, I certainly hope he doesn't throw out the baby with the bathwater. I'm referring to the breadth of the pipeline. It's one thing to trim expenses and concentrate on what's closer to fruition, but it's another thing entirely to stop all long term efforts and abandon all research on products beyond those already in the clinic. I would hope the new CEO takes a balanced approach that permits development of the pipeline, albeit slower, in addition to culminating partnerships on drugs in the clinic with worthy trial results. If the company gets sufficient partnerships, it can fund research on preclinical pipeline products until such time as approvals come for products that will generate the success investors are really looking for.
If I'm right, a few years from now investors will be looking at AEZS as an overnight success, not because it happened overnight, but because perhaps 90% of those invested in it had not heard of it prior to 2014. If you're lucky enough to be part of the 10% that did, you'll have been well rewarded.
They won't announce a partnership tomorrow, but they may announce being in discussions with one or more interested parties. I say this not because I know it to be a fact, but because such a partnership would be a very material event, and must be announced precisely when it occurs. Companies don't target the date of such partnerships to quarterly or annual reports.
I suspect that if they provide guidance, it won't be that concrete because no partnership is complete until the last party to act on it has. In another company I've seen a partnership take well over a year after shareholders were advised that discussions were well underway. Clearly their were some problems, including the spoilage of drugs intended for use in clinical trials, but it eventually was completed, and with the same partner that they were close to over a year before.
If they have meaningful discussions going, and say so, I expect it's as much as they can say, and if they don't say it, it may mean they cannot even say that much. All partnerships are done under serious confidentiality agreements, little or nothing can often be said until it's a fact, then as a material event, it must be said.
Perhaps it's warranted by the company's actions, but is it warranted by their deeds.
Their actions include the headlines, reverse split, Perifosine trial failures, etc. I remain invested because of their deeds, namely the development of a substantial drug pipeline, the approval of one drug, anticipation of approval of a second drug by next year, and I also anticipate positive trial data from a number of products they have, or will have in trials in the not to distant future. More importantly for short term price, I anticipate partnerships this year for AEZS-108 and 130.
I cannot say Perifosine is completely dead. We know the trials were designed by KERX, we don't know if they'd have been designed dramatically differently if they'd been designed by AEZS, or a major partner, but if AEZS gains major funding from a partnership for other drugs, I suspect they may revive Perifosine in the future.
For now, we wait for positive deeds to occur, when they do, the share price should take care of itself.
Happy Valentine's Day,
Today marks half way through the first quarter, we should get a quarterly report for the last quarter any day, but what's important is what's supposed to be happening this quarter.
1. First peek at the Perifosine MM Trial. No data expected, but hopefully a recommendation that's positive about continuing the trial.
2. NDA filing for approval of AEZS-130 as a diagnostic tool for HGH deficiency.
3. Initiation of Phase III Trial for AEZS-108.
All these are positive, all predicted to occur this quarter, now we're half way there. Let's just hope we have no further delays, but even two of the three wouldn't be bad.
Both have had their market caps diminished by 80% or more on a trial failure, but I believe that's where the comparison ends. CLSN has no other pipeline products, they have Thermodox in Phase II Trials in other cancers, but no Phase III's. In short, AEZS has far more potential with a strong pipeline, one approved product, one product soon to submit an NDA, one product about to start Phase III, and finally Perifosine, the failed product in Colon Cancer about to report on what they're told in a peek at the data in a second Phase III Trial in MM.
I believe anyone seriously comparing the two will recognize AEZS ought to be worth far more.
We know they've registered to sell substantial share to fund product launch, but is it their intent to handle everything themselves, including ultimately worldwide approvals. The other more likely possibilities IMHO are partnerships, or contracts with major Pharmas for either worldwide rights, or regional rights.
If a major Pharma buys into the product, and perhaps takes a major position in the company, no telling how high it takes the stock. The company may address this at the conference call they're holding prior to the market open tomorrow, as I'm on the West Coast, I'll wait to hear when I normally get up, usually after the market opens, but tomorrow I just might get up for the open.
Sentiment: Strong Buy
AEZS was badly burned by a trial designed by KERX. It's my belief that AEZS has stated a partnership would be sought after the Phase III is in place. We know the FDA has okayed a SPA, but I believe AEZS wants the trial either to start, or at least be in the hands of the IRB before they finalize a partnership. At that point a partner could expand the trial with many new sites, but they'd be running the trial IAW the protocol developed by AEZS.
I know it's speculation on my part, but the Phase II in colon cancer produced very successful data in Stage 3 patients, and very limited Stage 4 data. So why did KERX go with Stage 4 patients. I believe it was simple economics, Stage 4 patients don't live as long, the trial will be much shorter, the cost will be less, and the time to approval will be much faster. That of course is if the drug worked, which it apparently didn't. Had this trial been run in Stage 3 patients we'd probably only now be approaching the end of the trial, the cost would have been substantially higher to KERX, but we'd be looking at an approval.
I'm not suggesting a big Pharma partner would try the shortcut KERX attempted, but have no doubt in your mind, once partnered they'd have almost total control. By taking this trial into Phase III, AEZS has controlled the protocol to be used in the trial. A partner might choose to develop one or more additional trials, we know the drug works in several cancers, so this should certainly happen in time. Even big Pharma often prefers to gain the initial approval so sales revenue feed the cost of additional trials, but if they truly believe in a drug will have more than one pivotal trial in the works.
I believe in the case of the MM Trial, KERX is using essentially the same patients as were in the Phase II Trial which produced some excellent data. Had KERX not been in a cash bind and intending to be purchased on positive trial data in the failed trial, I believe they'd have stuck out the MM Trial however they simply couldn't afford it.
I do believe we'll get partnerships this year, perhaps as many as three of them, but they won't happen until AEZS wants them to. In AEZS-108's case, it's after the Phase III protocol is completely finalized. In Perifosine's case it's after the initial peek and recommendation to continue the MM Trial, or later. In AEZS-130's case it's after the NDA's filed and preliminary data's been received from the Cancer Cachexia Trial. In short, these partnerships could come in the current quarter, but more likely later in the year.
While it's certainly possible the greatest need for money would be post approval to handle the cost of rolling out the drug, it's also very possible they'll do the sure thing and issue the shares before, at a substantial discount. Should they place the stock now, somewhere around 35 million shares would be issued, but still the company would only have 50 some million shares outstanding, a rather low figure for a successful biotech.
While investors most certainly would rather they waited, perhaps needing 10 million or less shares to generate the same money, either way the key event is gaining the approval. If the approval comes with no further delay, investors will do well regardless of which tact the company takes, though certainly we'll do better if they wait.
On the other hand, long term investors willing to wait for an additional delay may be better served if they take the money before the PDUFA date, assuring funding to support meeting any demand the FDA may make.
In that no company can know for certain what the FDA will do, I doubt if they'll wait before acting.
Let's recognize that most institutions by their charters cannot invest in companies with the share price and market cap of AEZS. For institutional involvement to really grow, we need $5 or higher.
This doesn't mean these institutions don't invest, they may, but they never hold shares through a quarter, meaning they need not report their holdings. It's not impossible that an institution own a stock roughly 99% of the time and never report such ownership, a sale on the last day of the quarter need not be reported if the stock was purchased on or after the first day of that quarter.
We live in a world where investment could be reported almost instantaneously, yet institutions need only report what they hold for over one quarter, and then they don't need to report until half way through the next quarter. What could be done in an instant takes over 1.5 months to be reported, if we ever wanted to make this a fairer market, institutions could be required to report more, and report faster.
On another subject I believe we'd be better off going back to trading at greater increments for stock over $1 to pennies or nickel's, rather than hundredths of a cent where computers trade but investors can't. I can remember when spreads ran normally between an eight and quarter of a dollar, and the smallest increment was 1/16th of a dollar, while we don't need to go that far, penny spread wouldn't be bad, and even a nickel would be smaller than what was previously permitted. I believe the result would be a far more honest market.
As always, JMHO,
You won't see data, it's only a peek the control board will take after a fixed number of events. It's almost impossible to reach FDA required results at the first peek. We may get some encouraging words from the review board, but essentially it will be a recommendation to continue the trial.
I believe the start of Phase III for AEZS-108 and filing the NDA on AEZS-130 should both have impact that's equal to or greater than whatever's said in the peek at the Perifosine MM Trial.
I believe it's largely in line with my thoughts on AEZS for 2013, what do others think.
At this point, I believe the share price will be reasonably stable through the end of the year if there is no further news as tax loss selling is offset by 2013 growth potential.
The problem with Perifosine is only that it's first Pivotal Trial was poorly designed. While I believe KERX had more to do with that trial design than AEZS, it has condemned the drug until completely proven otherwise.
All sort of Perifosine data screams that it's effective in many cancers, including colon cancer, but not with Stage 4 patients. There is no doubt that before the MM Phase III Trial produces actual data we'll have several reports on Phase II Trials in other cancers. There is one thing that would give Perifosine instant credibility besides data from the MM Trial, that would be a partnership. Should a partnership occur with a major player in Pharma or Biotech that covered at least North America, and perhaps the ROW not covered by current partnerships, Perifosine and the remainder of AEZS would regain complete credibility, and I suspect have a price somewhere in double digit's, which is only to say it could approach 12 or even 24 month highs.
I would agree that originally forecast dates have slipped, I've watched many biotechs over the years and find few that ever met target dates consistently, in fact it was rare if ever that most did. While I'd certainly prefer new shares be issued at higher prices, again their actions mirror nearly all other biotech's in a similar position. As shareholders, we don't like it, but as investors, if the drugs are successful, we'll still do very well. The key, as always, is success, and I believe their broad pipeline will eventually have numerous successes.
It's now been roughly 30 years since IMGN began research on conjugate drugs, they've yet to produce an approved product. One CEO managed the company most of that time, but he's retired a few years ago. Their first approved product is anticipated early next year, it has a royalty rate under 5%, it will be at least a few more years before the second product could reach approval.
To date, I'd have to admit, it's not been very successful based just on the above. I think a more in depth review might suggest future success should be anticipated, and in spite of the fact that the former CEO isn't there any longer, it will almost entirely be based on what he put in place.
Looking at the company today, they have nearly a dozen drugs in or reaching the clinic, and several announced to be advancing. The drug to be approved, T-DM1, could replace and expand on Herceptin, which already earns over $5 billion a year, so it should earn hundreds of millions annually for IMGN, even at under 5%. Current partnerships should result in 2 or more new drugs entering the clinic for the foreseeable future, and IMGN ought to add one or two of their own as well each year.
To date, you might call it a failure, but what should be our concern, what it's been, or what it may be. I believe from now on it will be highly successful. Looking at AEZS, it actually has gotten a drug approved, it's very likely to have another one by 2014, perhaps more than one. It has a broad pipeline of drugs which mostly are owned completely by the company. I can't say it's a success yet, but believe it may have been a failure to date, but I'm concerned about what I expect it to do in the future, rather than abandoning it for what it's done in the past.
While I hope you've averaged down, even if not I believe some day you'll be even, then profitable if you hold out.
When you bought at $2.12 I'm sure it was in anticipation of good news with Perifosine and the belief that trading in double digit's was anticipated with approval. I believe it's even truer today, not just with Perifosine, but AEZS-108 and perhaps AEZS-130 if Cancer Cachexia proves worthy of further investigation. With substantially fewer share outstanding it should go dramatically higher, but naturally we own substantially less. The real question is how much dilution before success hits. We've already been diluted over 50% when you include the warrants, and we want those warrants cashed in as it means we're much higher than we are today. The good news might be that even if they double the share count, we're still under 40 million shares outstanding, a relatively low share count.
Certainly dilution won't stop, but it's a very different thing when 1 million shares brings in over $10 million dollars than when it takes many millions of shares to do the same.
Hopefully the bleeding will end sometime soon, but with tax selling season coming, I don't know that we won't trade below book value first.
If this get much cheaper I may have to figure out a way to get some more.
All you're saying is true, but what you fail to say is the company has moved forward with Perifosine in MM, that they're preparing for a Phase III with AEZS-108 without the companion diagnostic, which still is being developed.
On AEZS-130 they were denied rolling review, not fast track, they'll still be able to request it when the submit the complete NDA. I would hazard to guess, their application for rolling review came with Part 1 of the NDA submission, had it been accepted, but that's just a guess, the company's never stated precisely what they submitted. I believe we could see the entire document submitted late this year, but they've stated early next year is their target. By mid year we should also learn if AEZS-130 has sufficient efficacy shown in the Phase IIa Trial to continue testing in Cancer Cachexia, if it does, the value of this drug should grow dramatically.
Other AEZS compounds continue to advance into the clinic.
It's easy to cite all the negatives, however, in spite of all of them, the company still is building a tremendous pipeline and advancing that pipeline. I can think of no better way for them to occupy their time, and yes spend the money needed to make it happen. I don't believe their salaries and bonus plans are dramatically better or worse than most biotechs at a similar position in their development. Believe me, I don't like what they've done, but if the drugs work, I'll be fine. If the drugs don't work, their actions won't matter, the stock will be nearly worthless.
I'm of the belief that at least some of the drugs will gain both partnerships and approvals, some is all we need. No biotech I'm aware of with a pipeline of several products has had all products approved. If either Perifosine or AEZS-108 is approved and it's usage expands to the many cancers indicated in Phase II Trials, it will be a blockbuster, perhaps several times over. That sort of money should make all shareholders very happy.
The ultimate success or failure of AEZS won't be decided by dilution, reverse splits, offerings, management perks, etc. I will be decided by trial results that will if successful lead to both major partnerships and drug approvals.
AEZS with its offering has positioned itself to operate fully for perhaps a year or longer without either a new partnership, or additional offering and not be cash strapped for that long. Certainly starting the AEZS-108 Phase III Trial and continuing the Phase III for Perifosine will increase the current burn rate. Had they not done the offering they may have operated for another year, but they'd be very financially weakened if they failed to either partner, or gain an approval in that time. We can criticize, but if they bring a drug to partnership, and ultimately approval we should have tremendous success, if every drug fails, we'd fail with or without reverse splits, offerings, etc.
Will they do another offering in the next year? I wouldn't be adverse to it if say 1 million shares brought in $10 million, i.e. $10 a share. That's possible in a year of less, but only with some degree of success in the clinic, and perhaps with the FDA. It will take time but by this time next year I expect that if Perifosine continues, the trial should be to the point of taking the second peek, or perhaps near its conclusion. AEZS-108 should be well into Phase III, but probably not at the point where a peek will be taken. AEZS-130 could be approved as a diagnostic for HGH deficiency detection and we should know if further trials for Cancer Cachexia are warranted, a partnership for this drug is certainly possible, perhaps probable.
Remember, $10 is only about $1.66 pre-split. That's a number that should give most of us a profit, but not a tremendous one. Personally I'd be happy with $10 a year from now, but if all of the pipeline is continuing trials, I'll still be of the belief that the upside potential from there was still huge.
What you say is true, based on long term assumptions of success. Let's look at what I'm saying. If one or more of AEZS's potential blockbuster drugs are approved, partnered, and sales do grow into the billion dollar range, what should the price be. Further assumptions were that the O/S remained at 40 million or below, though 50 million could probably work as well, and that the royalty rate would be 10% or greater for a partnership for a drug in Phase III.
With precisely $1 billion in sales, this assumption would lead to earning $100 million from the one product, or putting it another way, $2.50 a share. While a P/E of 10 gives $25 a share, a P/E of 30 yields $75. It can be argued that all the money won't be earnings, however, I've not included anything for the up front and milestone payments in the partnership, I believe they will largely offset operational costs for years, so these truly would be earnings.
Looking at what P/E is appropriate probably has numerous potential things that influence it. One certainly is general market conditions. Of course the potential of the drug must be considered another, have sales peaked at $1 billion, or are the expectations much higher. Finally there is anticipation of what else the company has coming through the pipeline.
I believe that both AEZS-108 and Perifosine have blockbuster potential, and if AEZS-130 proves effective for Cancer Cachexia, it should as well. Others in development do as well, but their potential hasn't yet been documented with Phase II results indicating how effective they may be, and it will take 5 years or more before they're approaching approval, however by the time one of the above has reached $1 billion in sales, the others will be much better known.
You can say my numbers cannot be believed, but what numbers would others apply if you accept the basis for those numbers. If you cannot accept the fact that several of AEZS's drugs could have blockbuster potential I have only one question, why did you invest in the stock.
My take on KERX is that they simply were underfunded and not prepared for a failure. In their view, after announcing they wanted to be bought out, they decided to put all their eggs in their drug. Had a big Pharma been responsible for these trials, they'd have been much larger, probably more of them in other indications, and we'd probably had an approval by now.
Like most tiny biotechs, both KERX and AEZS look to do trials on a shoestring, while big Pharma has govt and the FDA convinced it costs them over $2 billion for each approved drug, which rolls all failure costs into the approved drugs. Tiny biotechs often put drugs through the process for tens or hundreds of millions, but their CEO's travel like we do, while the giant Pharma's need a fleet of executive jets for their key people.
By the way, I just got a reply from Roth, the offering is fully allocated, but they did send me the prospectus. Funny, I have a feeling that was true before the offering was even announced.
Others predicted that Roth would be the agent and said so after Roth rated AEZS a buy. I also suggested that if the total outstanding was held under 30 million until we have positive news and perhaps an approval, we'll all do quite well. While this is quicker than expected, is there anyone who thought they'd hold the count below 20 million.