Friday, July 31, 2009

VFC's Take on Stocks Recommended by Readers: AEZS

The comment boards and emails have brought quite a few stock suggestions from readers of VFC's Stock House, some asking for VFC's take on a particular stock. I'll address as many as I can, but keep in mind that I have not thoroughly researched most of these companies and I am offering my insights on my initial positive and/or negative feelings regarding these stocks.

AEZS: AEterna Zentaris is a speculative biopharmaceutical company that demonstrates why it is always best to choose speculative biotech/pharma plays that have multiple drug candidates in the pipeline and are not 'one trick ponies.'

When the company announced that it's lung cancer drug, Perifosine, failed to prove effective in a mid-stage trial, the stock plummeted to under thirty cents. However, because the company had more to offer than just Perifosine, the stock quickly recovered and closed the week at $2.62.

The recent rise in stock price (AEZS closed up over 20% on Friday) can be attributed to the pending Phase III results of Cetrorelix, a treatment for Benign Prostatic Hyperplasia (BPH). In plain English, it is a treatment for the non-cancerous enlargement of the prostate gland.

Phase II results were positive and there are no safety issues with the drug. Additionally, the company announced that they will be releasing the results earlier than expected, which is neither a positive nor negative implication, but encouraging, nonetheless.

The results will be released in Q3 and, if positive, an NDA will be filed with the FDA in 2010.

Current trading is based on anticipation of Cetrorelix results, but AEterna has additional early to mid stage drugs in the pipeline that treat various indicaations, including Ovarian, prostate, and endometrial cancers.

Judging by Friday's price spike on big volume, investors may be expecting news on Monday morning.

VFC's Take: I don't suggest chasing the stock if you're not already in. If the stock continues to rise and you buy in high, it'll hurt if the stock drops on bad news and you're stuck with a loss (see: those that bought INSM for over two bucks). Instead of chasing this stock and buying high, look for another speculative play that has not yet began to run.

However, if you want in on AEZS (the stock has good potential- especially if the Phase III results are positive), wait and see what happens on Monday morning. If positive results are released, then you've already missed the boat. In that case let the stock jump and keep it on your watch list because most likely it will retreat a bit as the hype dies down; there should be a quiet period between positive results and FDA submission/approval that will allow you to get in cheaper, if you want to hold through an FDA decision.

If you are already in this stock, congratulations on a nice run, but I suggest taking some profits on the spike leading up to results. Even though speculation is that results may be positive, nothing is a sure thing and bad results could drop the stock to below one dollar. Realize some profit and attempt to be on house money by the time results are released.

Disclosure: No position in AEZS.


1 comment:

  1. Hey VFC,

    Thanks for your article here on AEZS! I decided to sell not too long ago to lock in my profits (eventually I just decided to sell all), and got out in the mid 2s... Now I'm glad I did it...

    Thanks again!


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