2012 Preview: Aeterna Zentaris

With 2011 in the books, it's time to reflect on what has transpired in the year and what companies could be facing business-altering decisions in 2012. On today's plate we have small-cap biotechnology firm Aeterna Zentaris (NAS: AEZS) , a company I chronicled as a favorite small-cap of mine back in April.

But, before we dig too deeply into what 2012 may have to offer, let's get a quick snapshot at how 2011 treated shareholders.

Year-to-Date Stock Return


Price-to-Earnings (TTM)


Price-to-Sales (TTM)



$48.1M / $0.1M

Source: Yahoo! Finance. M= Millions, TTM= trailing 12 months, NM = not meaningful.

The third quarter marked the first profit in the company's history, but it still wasn't enough to save shareholders from another year of losses. The company's 11-molecule pipeline continued its march toward approval, with many of its prospective drugs showing promise in clinical and pre-clinical trials. But that's the past. Let's look ahead and see what could be driving Aeterna's stock price in 2012.

What to expect
The clear driving force behind Aeterna's business model is the acceptance of perifosine by the FDA. Perifosine is an experimental drug aimed at treating advanced colorectal cancer and multiple myeloma -- a market with little competition. Currently in stage 3 clinical trials, the drug has flown through previous clinical trials with remarkably positive results. Having completed enrollment of patients for these clinical trials in 2011, it's very likely that by mid- to late 2012 we will have the results of perifosine's effectiveness. Based on previous trials, I strongly suspect the results will be positive and the company will push for FDA approval of the drug -- then again, as we all know, nothing is a sure thing when it comes to getting a drug approved by the FDA.

Another prospective drug that will almost assuredly drive results is AEZS-108. This unique compound is targeted at advanced ovarian, prostate, and bladder cancer and has thus far shown significant progress through phase 2 clinical trials. In 2012, Aeterna will continue marching AEZS-108 through trials and possibly look to partner this drug up with a larger pharmaceutical company.

Remember, with perifosine, Aeterna has licensed out the rights to the drug to Keryx Biopharmaceuticals (NAS: KERX) , Handok, and Yakult Honsha in North America, South Korea, and Japan, respectively. With the company aggressively pushing its large pipeline through clinical trials, I do see the need for partnerships as vital because its $48 million in cash simply won't last. While these are as of right now nothing more than mere speculation on my part, cash-rich pharmaceuticals Merck (NYS: MRK) and Bristol-Myers Squibb (NYS: BMY) , which are fully entrenched in the cancer arena and looking for new drugs to add to their aging pipelines, look like potential partnership possibilities for Aeterna.

Finally, it comes down to cash. Aeterna has generally avoiding diluting the daylights out of shareholders, but with as many clinical trials running as the company currently has, a cash infusion sometime in 2012 will probably be necessary. Shareholders in the stock should be aware that a dilutive secondary offering is always a possibility with a small-cap biotech.

Foolish roundup
If my crystal ball weren't broken, I'd gladly give you the closing value for Aeterna Zentaris on Dec. 31, 2012. Unfortunately, I'm unable to do that. What I can tell you is I do firmly believe the company has what it takes to make a name for itself in 2012, and I continue to hold an outperform rating on it in my CAPS account. The question now becomes: What do you think is in store for Aeterna Zentaris in 2012?

Share your thoughts in the comments section below, and consider adding Aeterna Zentaris to your watchlist to keep track of this sure-to-be fast mover in 2012.

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At the time thisarticle was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. He strongly believes in donating to cancer research and encourages you to do the same. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policythat won't ask for your blood.

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