Just one month removed from its inclusion in my series, 10 small caps to rule them all, Aeterna Zentaris (Nasdaq: AEZS) continues to impress investors (and myself) with the development of its primary drug perifosine. Designed to treat late-stage colorectal cancer and multiple myeloma, perifosine looks well on its way to approval. I base this on moves the company made during the quarter which are highlighted in yesterday's quarterly filing.

We'll get to the company's pipeline update in a moment, but first I need to mention the most important aspect of Aeterna Zentaris' quarterly filing: its partnership with Yakult Honsha in Japan.

Although the partnership comes as no surprise since this deal was announced back in March, hearing about the deal is only half as appeasing as physically seeing the results. This quarter, Aeterna Zentaris received an $8.4 million payment from Yakult and stands to receive an additional $62.5 million if certain pre-established milestones are met. Even better, Aeterna Zentaris will be netting double-digit royalties from the sale of perifosine, as well as supplying the drug to Yakult at a cost-plus-basis.

The company has also outlicensed perifosine to Keryx Biopharmaceuticals (Nasdaq: KERX) in North America and Handok in South Korea. It's turning itself into a cash cow before the drug even hits the market.

What all of this means for shareholders and for Aeterna are fewer dilutive share offerings. Even though the company is generating just a trickle of regular cash flow from the sale of Cetrotide, the vitro fertilization therapy it partnered with Merck KGaA to market, it issued just 2.7 million shares during the quarter. That really is peanuts for a company with 11 prospects currently in its pipeline. This secondary offering and various milestone payments have vaulted Aeterna Zentaris' cash position to $41.1 million.

With the company's market value currently at $180 million, this means investors are valuing its potential pipeline of 11 drugs at just $139 million. As I noted previously, cancer therapy rivals Geron (Nasdaq: GERN) and ImmunoGen (Nasdaq: IMGN) sport market values of roughly $605 million and $868 million, respectively, despite having nearly all of their drugs stuck in pre-clinical or phase 1 status. Aeterna Zentaris gets absolutely no respect, and eventually the market is going to wise up to its potential.

Now for that pipeline update ...

At the American Association for Cancer Research, perifosine showed promise in reducing tumor activity in gastric cancer cell lines, and an even greater effect when used in combination with Millenium Pharmaceuticals' Velcade. From the oncology side of Aeterna's business, promising pre-clinical drug AEZS-131, which targets the pathway by which cancer cells replicate, has shown positive in vivo results.

To sum this up, Aeterna Zentaris continues to deliver. Forget that the company missed EPS by $0.04 or that it beat on revenue. What really matters is getting perifosine to market; then the $7.1 million in revenue the company produced this quarter will seem like a drop in the bucket. There's a reason Aeterna Zentaris made it into my list of the 10 small caps to rule them all, and it hasn't let me down as of yet.

Is there a side to this story that I'm missing? Share your thoughts in the comments section below and consider adding Aeterna Zentaris, as well as your own personalized list of companies to My Watchlist.