Top25-SA-Banner

Maxim Reiterates Buy on AEterna Zentaris Inc. (AEZS) Following 4Q:17 Update

With Macrilen now on the commercial table, AEZS is looking at a "leaner" future of expenses, cheers Jason McCarthy.


AEterna Zentaris Inc. (NASDAQ:AEZS) just delivered its fourth quarter and full-year show for 2017, and the star of the show here is Adult Growth Hormone Deficiency (AGHD) asset Macrilen, “going commercial.”

Maxim analyst Jason McCarthy notes AEZS has become “a leaner company” thanks to Macrilen’s FDA approval and out-licensing in the U.S., which translates to less operating expenses moving ahead.

“As discussed on the earnings call, the company is undergoing restructuring and reducing operating expenses as Macrilen is now partnered, and other factors,” highlights the analyst, who reiterates a Buy rating on AEZS stock with a $4 price target. Notably, these target expectations imply a close to 160% upside from current levels. (To watch McCarthy’s track record, click here)

For 2017, the drug maker closed the year with a net loss of $16.8 million and wrapped up its fourth quarter with $7.8 million in cash. Coupled with the license deal with Strongbridge Biopharma for the domestic commercial rights to Macrilen, which brought a $24 million upfront payment to the table, the analyst calculates AEZS has $31 million of cash on the balance sheet.

For 2018, the AEZS team anticipates $12 million to be spent in expenses, a marked scale-back by half considering the $24 million spent last year. Aeterna anticipates a range between $1 to $2 million in R&D expenses for this year, a meaningful cut from the $10.7 million in 2017. McCarthy underscores this stems from a dialed down R&D staff, a closed Zoptrex Program, as well as the green light for Macrilen.

While SG&A expense hovered at $13.3 million last year, these costs are expected to decrease to $9.2 to $11.5 million in 2018. “The reduction is mostly due to legal fees reported in 2017, as well as the elimination of the company’s sales force as they shift focus to licensing,” explains McCarthy.

On a final note for the company’s earnings showcase and updates, the analyst surmises: “We have extended our model to 2028, incorporating the royalty deal with Strongbridge for Macrilen. We value the company based on US royalties beginning 2H18, and EU royalties with similar terms beginning 2019.”