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Recently Aeterna Zentaris Inc. announced that it has entered into an agreement with Ergomed Clinical Research Ltd. for co-developing AEZS-108 (doxorubicin peptide conjugate) for endometrial cancer.

As per the terms of the agreement, Ergomed will bear 30% (up to $10 million) of the costs (clinical and regulatory) for the phase III trial evaluating AEZS-108 as a second-line treatment option for locally-advanced, recurrent or metastatic endometrial cancer versus doxorubicin (marketed as Doxil by Johnson & Johnson/(JNJ - Analyst Report), a commonly used chemotherapy drug.

In exchange, Aeterna Zentaris will pay Ergomed an agreed single digit percentage on net income from AEZS-108 sales for the above mentioned indication. We note that AEZS-108 will be evaluated under the US Food and Drug Administration’s (FDA) Special Protocol Assessment (SPA) in the phase III trial.

The open-label, randomized, multi-center (North America and Europe) phase III trial will enroll approximately 500 patients. The primary efficacy endpoint of the trial is to find significant improvement in median overall survival.

Earlier, in Sep 2011, Aeterna Zentaris presented encouraging data from a phase II study evaluating the efficacy and safety of AEZS-108 in patients suffering from advanced endometrial cancer. The candidate demonstrated overall response rate and clinical benefit rate of 30.8% and 74.4%, respectively. Median overall survival was 13.7 months, while median time-to-progression was found to be 7 months. AEZS-108 was well tolerated in the trial.

The candidate is also being evaluated for several other indications including ovarian cancer (phase II completed), prostate cancer (phase II), breast cancer (phase II) and bladder cancer (phase II). We note that AEZS-108 has received orphan drug status from the FDA for ovarian cancer. The European Medicines Agency has also granted orphan medicinal product designation to the candidate for ovarian cancer.

Aeterna Zentaris, a biopharmaceutical company, carries a Zacks #2 Rank (Buy) in the short run. Biopharma stocks that currently look attractive include companies like Athersys Inc. (ATHX - Snapshot Report) and UCB SA (UCBJF). These companies carry a Zacks #1 Rank (Strong Buy).

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