I believe that it’s perfectly okay to use a small portion of your portfolio for speculative trades. A perfect example of this would be an investment in Aeterna Zentaris (NASDAQ:AEZS). Like most small-capitalization biotech stocks, AEZS stock really isn’t meant for large positions.
But with that cautionary note in mind, I would gladly recommend considering Aeterna Zentaris as a worthy biotechnology-sector holding. The company is highly specialized, with a lead product that has regulatory approval and a prominent place in a niche market.
And now, Aeterna Zentaris is branching out into a much more crowded field: Covid-19 vaccine development. Can the company thrive in this domain? That’s the billion-dollar question, so keep reading for the scoop on this little biotech contender.
A Closer Look at AEZS Stock
It’s probably not a coincidence that soon after the company jumped into the Covid-19 vaccine field, the AEZS stock price jumped.
At the end of January, the stock was trading at just 69 cents. Soon, though, a rocket ride commenced in early February. The share price quickly achieved a 52-week high of $3.62 on Feb. 8.
Now, I generally recommend not chasing after a stock that has gone vertical and that principle seems to have applied to AEZS stock. Soon after topping out in February, the stock quickly declined. As of Mar. 11, the shares have settled at $1.24.
One thing’s for sure, though: traders will want to monitor that $1 level. That’s because the Nasdaq Exchange has been known to sometimes delist stocks if they trade below $1 for an extended period of time. If the stock drops back below that mark and stays there, it could be at risk.
A True Niche Leader
AEZS stock aside, though, I don’t want to give the impression that Aeterna Zentaris is dedicating all of its resources to developing a Covid-19 vaccine. That’s far from the truth. Instead, Aeterna remains a leader in one particular medical specialty.
The company’s lead product is known as macimorelin (marketed in the U.S. as Macrilen). It’s the first and “only U.S. [Food and Drug Administration] FDA and European Commission approved oral test indicated for the diagnosis of adult growth hormone deficiency (AGHD).”
If I’m going to invest in a biotech company, I definitely like to hear the phrase “first and only.” This is especially true when it comes to regulatory approvals, which are make-or-break in the biotech space.
There’s no question that Aeterna is the global leader in this niche. The company already generates revenues from macimorelin in the U.S., Canada, Europe and Israel. It also has plans to expand to other countries.
Plus, there could be another critical application for macimorelin. Aeterna intends to develop it to diagnose childhood-onset growth hormone deficiency (CGHD). Like AGHD, CGHD remains a high-need medical specialty. Patients and shareholders alike should appreciate Aeterna’s current and prospective efforts in these areas.
Let’s Talk About the Vaccine
There’s no denying it, however — investors want to hear about this company’s Covid-19 vaccine candidate.
This is a fairly new development for the company. In fact, it’s not even mentioned in Aeterna’s investor presentation. So, thank goodness InvestorPlace contributor William White is diligently reporting on the company’s latest developments.
As White notes, Aeterna Zentaris is “currently evaluating a pre-clinical vaccine from the Julius-Maximilians-University Wuerzburg.” I had never heard of this before, so I dug deeper into AEZS’s press releases and found out that it’s a well-regarded German research university.
Evidently, the vaccine technology developed at that educational institution “uses a typhoid fever vaccine as a carrier strain and has the potential to be an orally active COVID-19 (SARS-CoV-2) live-attenuated bacterial vaccine.”
Moreover, Aeterna now has an option agreement with the university in which it can “negotiate an exclusive worldwide license to develop this technology for the prevention of coronavirus diseases, including COVID-19.”
What makes the potential vaccine behind AEZS stock competitive against other offerings? Aeterna Zentaris’s CEO, Dr. Klaus Paulini, sees this as a chance to disrupt. Paulini notes that the company could develop a vaccine that’s “a more cost-effective oral alternative with less onerous storage requirements” than what’s currently available.
The Bottom Line
I see Aeterna Zentaris’s Covid-19 vaccine collaboration as — pardon the pun — a long shot. After all, there are already several other vaccines with regulatory approval available on the market.
Still, this one could have distinct advantages. An orally ingested Covid-19 vaccine would certainly be appealing.
Whether it will be approved and properly distributed remains to be seen. But if you’re a risk taker, AEZS stock might be worth a small position in your portfolio.
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On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.