Aeterna Zentaris


Aeterna Zentaris [$AEZS] is developing a drug called Zoptrex (zoptarelin doxorubicin). The phase 3 results for Zoptrex should be due by the end of December.

After doing some due diligence, we predict with high confidence that the phase 3 trial will fail to meet primary endpoints. If we are correct, it is likely that the company will not survive.

  • Phase 2 results for Zoptrex in endometrial cancer were weak, even with a softball study
  • Phase 1 data appears to show that Zoptrex might be less effective than the drug it is trying to replace
  • Zoptrex trials were not completed in 3 other types of cancer
  • Aeterna’s 2Q2016 financial statement admitted they do not have enough cash to continue another year of operations

The Drug

Zoptrex’s research history does not look great. Aeterna has two terminated clinical trials for Zoptrex, one for TNBC (a specific type of breast cancer) and one for urothelial (e.g. in the bladder/urethra) cancer. Both of these clinical trials were terminated for not being able to recruit enough participants. Even more importantly, a trial testing Zoptrex on prostate cancer was suspended because they didn’t have enough of the drug.

The clinical trial that has proceeded is for endometrial cancer. Currently, they’re running a phase 3 trial which is comparing Zoptrex (Aeterna’s drug), to the standard treatment, doxorubicin. The primary endpoint is overall survival, which is fairly common. You may have noticed that the standard treatment (doxorubicin) sounds a lot like the clinical name for Zoptrex (zoptarelin doxorubicin). That’s because Zoptrex is essentially the standard treatment paired with a compound that’s supposed to “aim” doxorubicin at the cancer cells more effectively.

Is it going to work?

Well, in the phase 1 trial, Aeterna tried a range of different doses: 10, 20, 40, 80, 160 and 267 mg/m2. The patients only responded to 160 and 267 mg/m2, and Aeterna was forced to continue with an effective dose of 267 mg/m2 for the phase 2 and phase 3 trials. This is bad because with chemotherapies, more is not better. More is worse, actually, because the side effects get worse and worse.

Here’s the clincher: 267 mg/m2 actually works out to be more doxorubicin than the standard dose of doxorubicin by itself. So much for aiming at the cancer cells more effectively.

This may be beating a dead horse, but in the phase 2 trial for Zoptrex, there were also several points of concern:

  • Only 23% of the patients enrolled in the trial had had prior chemotherapy or hormonal therapy, so we would expect good efficacy from this first-time treatment
  • 50% of the patients in the trial received a different drug (carboplatin/paclitaxel) while undergoing treatment with Zoptrex
  • Only 23% of patients responded to the drug, even though it was the first time they’d had chemotherapy

All of the above is fine for a phase 2 trial, which is typically about safety and demonstrating the beginnings of efficacy. However, with such weak efficacy results in both phase 1 and phase 2, we have serious doubts about the ability of Zoptrex to beat out the standard treatment during the phase 3 trial.


Financially, AEZS is hanging on by its fingertips. In June 2016, the financial statement admitted that they did not have enough cash to continue for another year of operations. This comes after several years of struggling — they have issued several rounds of fundraising, and in late November 2015 AEZS was forced to issue a press release titled “Aeterna affirms fundamental strength of business.” This press release followed on the heels of a 100:1 reverse split, in which outstanding shares were consolidated from some 656 million to 6.6 million. In October of that same year, AEZS closed their office in Quebec City.

In an effort to develop some cash flow, AEZS put together a sales team and developed a program in which they worked as sales consultants for other biopharma companies, but this program has been struggling as well — their sales commissions dropped by almost 50% in the second quarter of the program.

How to trade on this prediction

Finally, the important part! We never recommend shorting a biopharma stock because of a simple equation: the potential upside (if the stock goes to zero) is limited, while the potential downside (if the stock goes to $100, for instance) is unlimited. That’s a bad day.

Instead, if you’re bearish on $AEZS, we recommend that you use an options strategy which will cap your downside. The simplest way to do this would be to buy puts. If we’re wrong at the stock takes off, the worst possible outcome is that your puts become worthless. If you had shorted AEZS, though, you could be on the hook for many times your initial investment.

We can’t say it enough: Never open a position with unlimited downside.

The better bet? Buy some puts with a strike date in late December / early January, after the Phase 3 data is supposed to be released.


It’s never fun to predict that a drug or a company will fail. If Aeterna shuts down, lots of people will lose their jobs, and investors will lose a lot of money. Still, we’re here to make sure that you aren’t one of the people losing money.

Prediction: Phase 3 Failure