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    Stock Alert for Aeterna Zentaris Inc. (AEZS)

    Aeterna Zentaris Inc. (AEZS) is a late-stage oncology drug development company currently investigating potential treatments for various cancers including colorectal, multiple myeloma, endometrial, ovarian, prostate and bladder cancer. The Company’s innovative approach of “personalized medicine” means tailoring treatments to a patient’s specific condition and to unmet medical needs. AEZS’s deep pipeline is drawn from its proprietary discovery unit providing the Company with constant and long-term access to state-of-the-art therapeutic options.

    Share Statistics (30-Aug-11) FY2009 FY2010 % Chg Q22010 Q22011 % Chg
    Symbol AEZS Revenue, $Mn 63.24 27.70 -56.2% 5.58 6.52 16.8%
    Current price $2.05 Gross marg. 73.9% 32.5% -56.0% 21.0% 15.8% -24.8%
    52wk Range: $0.93-$2.68 Oper. margin -89.5% -122.2%
    Avg Vol (3m): 3,152,100 Net margin -26.5% -102.7% 287.5% -110.8% -162.1% 46.3%
    Market Cap. 195.13M
    Shares Outstanding 95.18M EPS, $ -0.30 -0.38 26.7% -0.08 -0.12 50.0%

    Source: Reuters.com, SEC Filings

    Investment Highlights

    Shares of AEZS have gained 10.94% in the last five days; 2.53% in the last month; and 111.46% year-to-date.

    Shares of the Quebec-based cancer and endocrine drug maker jumped as much as 14% on Tuesday after it announced positive results of its completed Phase III study with AEZS-130 as the first oral diagnostic test for Adult Growth Hormone Deficiency (AGHD).

    In the press release, the Company said the results show that AEZS-130 reached its primary endpoint demonstrating >90% area-under-the-curve (AUC) of the Receiver Operating Characteristic (ROC) curve, which determines the level of specificity and sensitivity of the product. The Company added that it is currently proceeding with further detailed analyses of the data and preparing for a pre-New Drug Application (NDA) meeting with the U.S. Food and Drug Administration (FDA) in the upcoming months, which would be followed by the filing of an NDA for the registration of AEZS-130 in the United States.

    The parameters of the study were achieved as agreed to with FDA under the Company’s Special Protocol Assessment (SPA). Importantly, the primary efficacy parameters show that the study achieved both specificity and sensitivity at a level of 90% or greater.  In addition, 8 of the 10 newly enrolled AGHD patients were correctly classified by a pre-specified peak GH threshold level. The use of AEZS-130 was shown to be safe and well tolerated overall throughout the completion of the trial.

    AEZS-130, a ghrelin agonist, is a novel orally active small molecule that stimulates the secretion of growth hormone.  It has been granted orphan-drug designation by the FDA for use as a diagnostic test for growth hormone deficiency. Aeterna Zentaris owns the worldwide rights to AEZS-130 which, if approved, would become the first orally administered diagnostic test for AGHD.

    AGHD affects 35,000 adult Americans, with 6,000 new adult patients diagnosed each year. Growth hormone not only plays an important role in growth from childhood to adulthood, but helps promote good health throughout life. It is usually characterized by low energy levels, decreased strength and exercise tolerance, increased weight or difficulty losing weight, emotional changes, anxiety and impaired sleep.

    Investors also welcomed news yesterday that a poster on AEZS’s novel orally active anticancer Erk inhibitor, which includes AEZS-131, was presented at the 242nd American Chemical Society National Meeting held at the Colorado Convention Center in Denver, Colorado. The poster was presented by Matthias Gerlach Ph.D., senior director of medicinal chemistry for AEZS.

    Source: http://www.aezsinc.com/en/page.php?p=60

    Financial Summary

    AEZS reported revenues of $6.5 million for the three-month period ended June 30, 2011, as compared to $5.6 million for the same period in 2010. This increase is largely related to comparative higher-than-normal deliveries of Cetrotide to certain customers, as well as to the comparative strengthening of the euro against the U.S. dollar.

    Research and development costs, net of tax credits and grants were $5.6 million for the three-month period ended June 30, 2011, as compared to $5.4 million for the same period in 2010.

    Selling, general and administrative expenses were $3.4 million for the three-month period ended June 30, 2011, as compared to $3.7 million for the same period in 2010.

    Net finance (costs) income are comprised predominantly of net foreign exchange gains and losses, the change in fair value of the Company’s warrant liability and the unrealized gain on the Company’s short-term investment (2011 only).

    For the three-month period ended June 30, 2011, net finance costs totaled $2.6 million, as compared to a net finance income of $1.8 million for the same period in 2010. This significant increase in net finance costs is due to the change in fair value of the Company’s warrant liability. That change results from the periodic “mark-to-market” revaluation of currently outstanding share purchase warrants. Additionally, the increase is due to higher foreign exchange losses, which in turn resulted primarily from the comparative weakening of the U.S. dollar against the euro during the second quarter of 2011, partially offset by the unrealized gains on the Company’s short-term investment, which is carried at fair value. Neither the loss resulting from the periodic mark-to-market valuation of the warrants nor the gain resulting from the fair value adjustments to the short-term investment has resulted in any cash disbursement or cash receipt during the three-month period ended June 30, 2011.

    Net loss for the three-month period ended June 30, 2011, was $10.6 million, or $0.12 per basic and diluted share, as compared to $6.2 million, or $0.08 per basic and diluted share, for the same period in 2010. This increase is mainly related to higher net finance costs related to the periodic mark-to-market valuation of the warrants (non-cash) and higher foreign exchange losses, partly compensated by the unrealized gains on the Company’s short-term investment (non-cash).

    Source: http://www.aezsinc.com/en/page.php?p=60&q=450

    Financial Strength (30-Aug-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 2.90 2.92 1.78 0.74
    Current Ratio (MRQ) 3.15 3.52 2.18 1.09
    LT Debt to Equity (MRQ) 15.33 23.42 113.34
    Total Debt to Equity (MRQ) 18.00 29.73 154.01
    Interest Coverage (TTM) 17.95 1.67 22.82

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    This is the consensus forecast among 13 polled investment analysts. Against the Aeterna Zentaris Inc company.

    Analyst Detail

    Buy

    Outperform

    Hold

    Underperform

    Sell

    No Opinion

    Latest 5 5 2 1 0 0
    4 weeks ago 5 4 3 1 0 0
    2 months ago 4 4 3 1 0 0
    3 months ago 4 3 3 1 0 0
    Last year 2 1 2 1 0 0

    Source: markets.ft.com

    Consensus Estimates Analysis

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Sep-11 7 6.67 6.93 6.40
    Quarter Ending Dec-11 7 6.71 7.21 6.25
    Year Ending Dec-11 10 26.48 28.59 20.88 17.50
    Year Ending Dec-12 10 27.55 41.20 13.50 12.45
    EARNINGS (per share)
    Quarter Ending Sep-11 9 -0.09 -0.08 -0.12 -0.07
    Quarter Ending Dec-11 8 -0.10 -0.08 -0.13 -0.07
    Year Ending Dec-11 12 -0.38 -0.26 -0.48 -0.39
    Year Ending Dec-12 11 -0.30 -0.15 -0.42 -0.39

    Technical Analysis

    Source: http://stockcharts.com

    AEZS is above the upper Bollinger Band, implying that it is currently extended from its recent trend.

    AEZS’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Aug30-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    EntreMed Inc. ENMD 1.43 16.53M n/a n/a n/a n/a
    Abbott Laboratories ABT 51.84 80.69B n/a n/a 2.08 1.99
    Celgene Corp. CELG 59.80 27.44B n/a n/a 5.84 5.21
    Merck & Co. Inc. MRK 32.89 101.33B n/a n/a 2.13 2.15
    Biotechnology Median       17.48 n/a 8.31 n/a
    AEterna Zentaris Inc. AEZS 2.07 196.94M n/a n/a 7.44 7.15

    Source: Thomson Financial

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