Talk:AETERNA ZENTARIS INC. (AEZ:CA)

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What do you think about this company? If you have general comments, add a reply to this section by clicking the [edit] link here ----->

ValueSpider 18:54, 27 November 2006 (PST)

My Thoughts on the Company's Pipeline

Cetrorelix Cetrorelix has the same active ingredient as Cetrotide which has been approved in US, Europe and Japan for IVF application. The compound has been shown to be relatively safe for short term dosing and do not exhibit many of the flare-up side effects related to LHRH agonists. The company and its partners are developing the drug for endometriosis and BPH. Solvay has the worldwide right ex Japan for Endometriosis and will assume development cost for this indication. After the conclusion of Phase II, AEZS regained rights for BPH indication from Solvay and plan to continue development for this indication by itself or with new partner. In Japan, Shionogi and Nippon Kayaku own the right to all indications and aggressively pursuing development for BPH.

Endometriosis Cetrorelix market for this indication will be as an alternative to LHRH agonist like Lupron or Zoladex. Phase II data showed that Cetrorelix is efficacious in this indication without flare-up side effect associated with LHRH agonists. The fact that estrogen level is not suppressed down to castration level should reduce the risk of osteoporosis. Results from phase III trial will probably not be available until 2008 or 2009. However, it is important for the trial to show that Cetrorelix has comparable efficacy to LHRH agonists with cleaner profile. The emphasis will be on the long term treatment data and risk of osteoporosis.

Sales of LHRH agonists for endometriosis are estimated to be around $450 million. Assuming that Cetrorelix will be superior to LHRH agonists, it is reasonable to forecast that at least $100 to 150 million peak sales potential for the drug. This number might be higher considering that Endometriosis is under-diagnosed. However, a potential big competitor might be Neurocrine’s oral LHRH antagonist, currently in Phase II trial.

Benign Prostatic Hypertrophy (BPH) Phase II data of Cetrorelix showed that it is efficacious is treating BPH symptoms (IPSS and uroflow) and slight reduction of prostate size. Currently BPH is treated with alpha blockers that only treat symptoms, but have no effect on prostate size and 5 alpha reductase inhibitor that shrinks prostate size, but minimal effect on symptoms. In 9/2004, FDA approved the use of alpha blockers with Finasteride in combination. AEZS management indicated that they expect to position Cetrorelix as an alternative to this combination, especially with the issue of compliance in the oral combination treatment. AEZS is currently still designing Phase III trials. A phase III trial data that shows more significant prostate reduction after longer treatment and avoidance of surgery can bring major marketing benefit.

AEZ’s Japanese partners are expected to release their phase II Cetrorelix data for BPH later this year. However, I expect it to confirm released results and have minimal effect on valuation. Currently BPH has more than $3 billion market size. With Flomax as the leader in alpha blocker with sales of more than $2 billion and Proscar as the leading 5 Alpha reductase inhibitors with more than $700 million annual sales. Because of the unfavorable i.m. (injection) dosing, I do not expect Cetrorelix to gain significant market share. It may be reasonable to assume that Cetrorelix might achieve up to $100 million in sales for this indication.

Perifosine Perifosine is a novel orally bioavailable AKT inhibitor in clinical trials. Phase I trial showed that the drug is relatively safe and well tolerated. Currently there are multiple perifosine phase I/II trials ongoing as monotheraphy or in combination with radiotherapy or other chemotherapy. Currently the drug has not proven itself as a monotheraphy agent, as negative result were observed in androgen independent prostate cancer and untreated/locally advanced soft tissue sarcoma.

The most encouraging data came from Phase I study of Perifosine in combination with radiotherapy announced as 2004 ASCO. This result might be a precedent to a positive result in the phase II trial in NSCLC in combination with radiotherapy.

The management is also excited about a phase II trial at Dana-Farber Institute sponsored by Keryx, AEZS’ North American licensee for Perifosine. The trial is modeled after Velcade’s Phase II SUMMIT study which was the basis of Velcade’s approval. In this trial, Perifosine is first given alone to relapsed or relapsed/refractory multiple myeloma patients. If the patient progresses on Perifosine alone, dexamethasone is added to the regimen.

Given high potential market size for this drug, and possibility that accelerated regulatory approval, I think any positive news about this drug can have tremendous upside on AEZS’ valuation.

Ozarelix Ozarelix is second generation LHRH antagonist. It is licensed to Spectrum Pharmaceutical for North America and India. The drug is highly potent and long lasting. Phase I trial showed that even at minimum dose Ozarelix suppressed testosterone level down to castration and showed dose dependency in suppression duration.

It is currently developed for treatment of prostate cancer patients needing castration and 2nd line BPH treatment. However, given impressive castration efficacy, I do not think it is suitable for BPH. This drug however can be a compelling alternative to LHRH agonist given the lack of testosterone flare and surge effect associated with LHRH agonist. The drug may be reduce the need for surgery significantly too.

However, the market potential for this drug is still uncertain. The most recent LHRH antagonist for prostate cancer (Plenaxis/Aberelix) failed to penetrate market (achieved annual sales <$1 million before withdrawn). However, abarelix carried a black box warning due to high incidence severe allergic reaction. Further studies found that the allergic reaction was caused by abarelix’s formulation instead of the active ingredient. It has been demonstrated that Ozarelix does not cause such reaction. In addition, it is important also in subsequent clinical trial for ozarelix to show that it does not exhibit long term potency loss, associated with abarelix.

While the drug can be promising for prostate cancer treatment, its adoption might be slow due to oncologists’ over-cautiousness caused by bad precedent set by abarelix. The company is expected to release Phase II data in the near future.

--khartand 11:49, 1 March 2007 (PST)

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