Aeterna fights to hang on to Nasdaq listing

Posted on by Listify Me

 
Jul 16, 2012 – 2:02 PM ET
| Last Updated: Jul 16, 2012 2:14 PM ET

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If Aeterna Zentaris loses its Nasdaq listing, accessing capital becomes that much more difficult, said one Toronto-based analyst

MONTREAL – Aeterna Zentaris Inc. was once a high-flying drug maker whose $20 share price rested on its plan to use shark cartilage to treat cancer.

Today, the Quebec City company is a beaten-down penny stock struggling to keep its U.S. listing and bring its pipeline of products to market.

Next month, investors will convene at the Montreal offices of law firm Norton Rose Canada to vote on a special resolution that would consolidate Aeterna’s common shares in an attempt to avoid a potential delisting on the Nasdaq. The stock currently trades at about 45¢, below the requirements for a continued presence on the exchange.

Aeterna management wants to stay listed to be able to raise money more easily. And it believes that the possible increase in the share price through consolidation may renew investor interest in the company, specifically from institutional investors who have formal or informal policies that prevent them from buying penny stocks.

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If the company loses its Nasdaq listing, accessing capital becomes that much more difficult, said one Toronto-based analyst who follows the company. It’s a highly liquid stock that trades a lot in that market. The company is also listed on the Toronto Stock Exchange but volumes are lower.

“Really what I think is most important here is for the management team to build back its credibility,” the analyst said Monday. “Drug development is a difficult business. And they brought two drugs very close to the finish line and they both failed.”

The most recent setback for Aeterna chief executive Juergen Engel came April 2, when he announced that a clinical trial evaluating the company’s perifosine product for treatement of late stage colorectal cancer showed it didn’t work as hoped.

The company subsequently lost two-thirds of its market value that day. It now faces at least one class action lawsuit in the United States as plaintiffs allege Mr. Engel and chief financial officer Dennis Turpin misled investors about the timing and success of the clinical trial. A judge must certify the suit before it is allowed to proceeed.

Aeterna Zentaris had total assets of US$74.1-million and liabilities of US$82.7-million as of the end of March this year, according to a recent investor presentation.

Still, analysts like the company’s deep pipeline of products. And they say its decision to move forward with perifosine trials for the treatment of another condition, multiple myeloma, has some logic to it because it’s a minimal investment to push it to commercialization.

Until those drugs bear more fruit however, the more immediate concern is simply avoiding a fall of its stock to “over-the-counter” bulletin board status.

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