While recently reviewing cash positions of Biotech/Pharma companies that may be undervalued, AEterna Zentaris was the most notable and required a deeper look. The company has a cash balance of US$53.8 million (as of Sep 30, 2022) and a current market valuation of US$18.5 million. So far in 2023, AEterna Zentaris has outperformed the sector as a whole, due in part coming off of its 2022 lows of $2.89 to a current share price of $3.75, a gain of 29.7%.
AEterna Zentaris Inc. (NASDAQ:AEZS) (TSX:AEZS) is a dual listed biopharmaceutical company that is currently fully funded and able to meet all management’s current expectations and development objectives through 2025. The company's lead product, macimorelin (Macrilen™; Ghryvelin®), is the first and only U.S. FDA and European Commission approved oral test indicated for the diagnosis of adult growth hormone deficiency (AGHD) and a pipeline of preclinical therapeutics. They are currently looking to use Macimorelin to test Childhood-Onset Growth Hormone Deficiency (CGHD). Phase 3 DETECT study for diagnosis of CGHD is expected to complete enrollment by the end of 2023. Novo Nordisk is returning full rights to Macrilen ™(Macimorelin) in the U.S. and Canada to the company in May 2023 while the company maintains licensing, distribution and commercial agreements in other countries around the globe. AEterna Zentaris states they are using “Robust business development efforts' ' to identify and secure a new development and commercialization partner.
Having funds to meet expectations until 2025 can provide an opportunity to meet goals such as obtaining approvals, arranging licensing agreements and other events that could change the company’s valuation from its current beleaguered status. In July 2022, the company completed a 25-1 share consolidation leaving only 4.6m shares outstanding and resulting in share capital being valued at over $60 per share. This can have an effect on legacy or current shareholders sentiment but provide an opportunity for other new shareholders to buy shares in the company well below any prior financing.
Being a dual listed stock between the NASDAQ and Toronto Stock Exchange, arbitrage dealers generally maintain consistent pricing after currency conversion. AEZS does trade more volume on the NASDAQ with an average 13,245 shares traded per day. TSX trades less than 2,000 shares per day on average. When a stock’s liquidity is low, it is important to be mindful of position sizing and type of orders. By using limit orders, the arbitrage dealers will usually fill an order as the price rises or decreases. Whereas, market order buys and sells can have dramatic effects on the share price.
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