Filed
pursuant to Rule 424(b)(3)
Registration
No. 333-239264
PROSPECTUS
SUPPLEMENT NO. 2
28,533,333
Common Shares
Aeterna
Zentaris Inc.
This
Prospectus Supplement No. 2 (this “Prospectus Supplement”) amends and supplements our Prospectus dated July 1, 2020
(the “Prospectus”), which forms a part of our Registration Statement (our “Registration Statement”) on
Form F-1 (Registration No. 333-239264). This Prospectus Supplement is being filed to amend and supplement the information included
or incorporated by reference in the Prospectus with the information contained in this Prospectus Supplement. The Prospectus and
this Prospectus Supplement relate to the resale of up to 28,533,333 of our common shares issuable upon exercise of certain outstanding
warrants.
This
Prospectus Supplement includes information from our Reports on Form 6-K, which were furnished with the Securities and Exchange
Commission on November 5, 2020.
This
Prospectus Supplement should be read in conjunction with the Prospectus that was previously delivered, except to the extent that
the information in this Prospectus Supplement updates and supersedes the information contained in the Prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this Prospectus Supplement or the Prospectus. Any representation to the contrary is a
criminal offense.
The
date of this Prospectus Supplement is November 13, 2020.
Exhibit
99.1
Condensed
Interim Consolidated Financial Statements
As
at SEPTEMBER 30, 2020 and for the three-month AND NINE-MONTH periodS ended September 30, 2020 and 2019
(In
thousands of US dollars)
(Unaudited)
Condensed
Interim Consolidated Financial Statements
As
at SEPTEMBER 30, 2020 and for the three-month AND Nine-MONTH periodS ended September 30, 2020 and 2019
(Unaudited)
Condensed
Interim Consolidated Statements of Financial Position
(In
thousands of US dollars)
(Unaudited)
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
|
$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
21,746
|
|
|
|
7,838
|
|
Trade and other receivables (note 5)
|
|
|
841
|
|
|
|
658
|
|
Inventory
|
|
|
371
|
|
|
|
1,203
|
|
Prepaid expenses and other current assets
|
|
|
358
|
|
|
|
1,211
|
|
Total current assets
|
|
|
23,316
|
|
|
|
10,910
|
|
Restricted cash equivalents
|
|
|
325
|
|
|
|
364
|
|
Right of use assets (note 6)
|
|
|
171
|
|
|
|
582
|
|
Property, plant and equipment
|
|
|
25
|
|
|
|
35
|
|
Identifiable intangible assets
|
|
|
28
|
|
|
|
40
|
|
Goodwill (note 7)
|
|
|
8,406
|
|
|
|
8,050
|
|
Total assets
|
|
|
32,271
|
|
|
|
19,981
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Payables and accrued liabilities (note 8)
|
|
|
936
|
|
|
|
2,148
|
|
Current provision for restructuring and other costs (note 9)
|
|
|
117
|
|
|
|
418
|
|
Income taxes payable
|
|
|
—
|
|
|
|
1,448
|
|
Current portion of deferred revenues
|
|
|
619
|
|
|
|
991
|
|
Current portion of lease liabilities (note 10)
|
|
|
125
|
|
|
|
648
|
|
Current portion of warrant liability (note 11)
|
|
|
—
|
|
|
|
6
|
|
Total current liabilities
|
|
|
1,797
|
|
|
|
5,659
|
|
Deferred revenues
|
|
|
128
|
|
|
|
185
|
|
Lease liabilities (note 10)
|
|
|
76
|
|
|
|
255
|
|
Warrant liability (note 11)
|
|
|
—
|
|
|
|
2,249
|
|
Employee future benefits (note 12)
|
|
|
14,851
|
|
|
|
13,788
|
|
Provision for restructuring and other costs (note 9)
|
|
|
271
|
|
|
|
308
|
|
Total liabilities
|
|
|
17,123
|
|
|
|
22,444
|
|
SHAREHOLDERS’ EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
235,008
|
|
|
|
224,528
|
|
Warrants (notes 11 and 13)
|
|
|
12,402
|
|
|
|
—
|
|
Other capital
|
|
|
89,489
|
|
|
|
89,806
|
|
Deficit
|
|
|
(321,363
|
)
|
|
|
(316,891
|
)
|
Accumulated other comprehensive income (loss) (“AOCI”)
|
|
|
(388
|
)
|
|
|
94
|
|
Total shareholders’ equity (deficiency)
|
|
|
15,148
|
|
|
|
(2,463
|
)
|
Total liabilities and shareholders’ equity (deficiency)
|
|
|
32,271
|
|
|
|
19,981
|
|
Commitments
and contingencies (note 20)
The
accompanying notes are an integral part of these condensed interim consolidated financial statements.
Approved
by the Board of Directors
/s/
Carolyn Egbert
|
|
/s/
Pierre-Yves Desbiens
|
Carolyn
Egbert
Chair
of the Board
|
|
Pierre-Yves
Desbiens
Director
|
Condensed
Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)
For
the three MONTHS ended September 30, 2020 and 2019
(In
thousands of US dollars, unaudited)
|
|
Common shares (number of)
|
|
|
Share capital
|
|
|
Warrants
|
|
|
Other capital
|
|
|
Deficit
|
|
|
AOCI
|
|
|
Total
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance - July 1, 2020
|
|
|
23,584,071
|
|
|
|
226,724
|
|
|
|
4,237
|
|
|
|
89,467
|
|
|
|
(319,592
|
)
|
|
|
95
|
|
|
|
931
|
|
Net (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,136
|
)
|
|
|
—
|
|
|
|
(1,136
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(483
|
)
|
|
|
(483
|
)
|
Actuarial (loss) on defined benefit plan (note 12)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(635
|
)
|
|
|
—
|
|
|
|
(635
|
)
|
Comprehensive (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,771
|
)
|
|
|
(483
|
)
|
|
|
(2,254
|
)
|
Reclassification of warrant liability to equity (note 11(b))
|
|
|
|
|
|
|
—
|
|
|
|
3,140
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,140
|
|
Issuance of common shares and warrants, net of transaction costs (note 13)
|
|
|
39,094,542
|
|
|
|
8,284
|
|
|
|
5,025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,309
|
|
Share-based compensation costs (note 14)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
Balance – September 30, 2020
|
|
|
62,678,613
|
|
|
|
235,008
|
|
|
|
12,402
|
|
|
|
89,489
|
|
|
|
(321,363
|
)
|
|
|
(388
|
)
|
|
|
15,148
|
|
|
|
Common shares (number of)
|
|
|
Share capital
|
|
|
Warrants
|
|
|
Other capital
|
|
|
Deficit
|
|
|
AOCI
|
|
|
Total
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance - July 1, 2019
|
|
|
16,632,410
|
|
|
|
223,140
|
|
|
|
—
|
|
|
|
89,824
|
|
|
|
(315,977
|
)
|
|
|
(15
|
)
|
|
|
(3,028
|
)
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(331
|
)
|
|
|
—
|
|
|
|
(331
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
377
|
|
|
|
377
|
|
Actuarial (loss) on defined benefit plan (note 12)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(536
|
)
|
|
|
—
|
|
|
|
(536
|
)
|
Comprehensive (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(867
|
)
|
|
|
377
|
|
|
|
(490
|
)
|
Issuance of common shares, net of transaction costs (note 13)
|
|
|
3,325,000
|
|
|
|
1,290
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,290
|
|
Exercise of deferred share units (note 13)
|
|
|
37,100
|
|
|
|
101
|
|
|
|
—
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
(20
|
)
|
Share-based compensation costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55
|
|
Balance – September 30, 2019
|
|
|
19,994,510
|
|
|
|
224,531
|
|
|
|
—
|
|
|
|
89,758
|
|
|
|
(316,844
|
)
|
|
|
362
|
|
|
|
(2,193
|
)
|
Condensed
Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)
For
the NiNE months ended september 30, 2020 and 2019
(In
thousands of US dollars, unaudited)
|
|
Common shares (number of)
|
|
|
Share capital
|
|
|
Warrants
|
|
|
Other capital
|
|
|
Deficit
|
|
|
AOCI
|
|
|
Total
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance - January 1, 2020
|
|
|
19,994,510
|
|
|
|
224,528
|
|
|
|
—
|
|
|
|
89,806
|
|
|
|
(316,891
|
)
|
|
|
94
|
|
|
|
(2,463
|
)
|
Net (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,807
|
)
|
|
|
—
|
|
|
|
(3,807
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
(482
|
)
|
|
|
(482
|
)
|
Actuarial (loss) on defined benefit plan (note 12)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
(665
|
)
|
|
|
—
|
|
|
|
(665
|
)
|
Comprehensive (loss)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,472
|
)
|
|
|
(482
|
)
|
|
|
(4,954
|
)
|
Reclassification of warrants to equity (note 11(b))
|
|
|
—
|
|
|
|
—
|
|
|
|
7,377
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,377
|
|
Issuance of common shares and warrants, net of transaction costs (note 13)
|
|
|
42,684,103
|
|
|
|
10,480
|
|
|
|
5,025
|
|
|
|
(362
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
15,143
|
|
Share-based compensation costs (note 14)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45
|
|
Balance – September 30, 2020
|
|
|
62,678,613
|
|
|
|
235,008
|
|
|
|
12,402
|
|
|
|
89,489
|
|
|
|
(321,363
|
)
|
|
|
(388
|
)
|
|
|
15,148
|
|
|
|
Common shares (number of)
|
|
|
Share capital
|
|
|
Warrants
|
|
|
Other capital
|
|
|
Deficit
|
|
|
AOCI
|
|
|
Total
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance - January 1, 2019
|
|
|
16,440,760
|
|
|
|
222,335
|
|
|
|
—
|
|
|
|
89,342
|
|
|
|
(309,781
|
)
|
|
|
11
|
|
|
|
1,907
|
|
Net (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,036
|
)
|
|
|
—
|
|
|
|
(5,036
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
351
|
|
|
|
351
|
|
Actuarial (loss) on defined benefit plan (note 12)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,027
|
)
|
|
|
—
|
|
|
|
(2,027
|
)
|
Comprehensive (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,063
|
)
|
|
|
351
|
|
|
|
(6,712
|
)
|
Exercise of warrants, stock options and deferred share units
|
|
|
228,750
|
|
|
|
906
|
|
|
|
—
|
|
|
|
(329
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
577
|
|
Issuance of common shares and warrants, net of transaction costs
|
|
|
3,325,000
|
|
|
|
1,290
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,290
|
|
Share-based compensation costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
745
|
|
|
|
—
|
|
|
|
—
|
|
|
|
745
|
|
Balance – September 30, 2019
|
|
|
19,994,510
|
|
|
|
224,531
|
|
|
|
—
|
|
|
|
89,758
|
|
|
|
(316,844
|
)
|
|
|
362
|
|
|
|
(2,193
|
)
|
The
accompanying notes are an integral part of these condensed interim consolidated financial statements.
Condensed
Interim Consolidated Statements of Comprehensive Loss
For
the three AND nine months ended september 30, 2020 and 2019
(In
thousands of US dollars, except share and per share data)
(Unaudited)
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30
|
|
|
September 30
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Revenues (note 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty income
|
|
|
23
|
|
|
|
8
|
|
|
|
47
|
|
|
|
29
|
|
Product sales
|
|
|
—
|
|
|
|
—
|
|
|
|
1,016
|
|
|
|
129
|
|
Supply chain
|
|
|
87
|
|
|
|
256
|
|
|
|
168
|
|
|
|
301
|
|
Licensing revenue
|
|
|
18
|
|
|
|
19
|
|
|
|
55
|
|
|
|
55
|
|
Total revenues
|
|
|
128
|
|
|
|
283
|
|
|
|
1,286
|
|
|
|
514
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
33
|
|
|
|
—
|
|
|
|
907
|
|
|
|
101
|
|
Research and development costs
|
|
|
372
|
|
|
|
475
|
|
|
|
880
|
|
|
|
1,574
|
|
General and administrative expenses
|
|
|
1,180
|
|
|
|
1,364
|
|
|
|
3,445
|
|
|
|
4,924
|
|
Selling expenses
|
|
|
283
|
|
|
|
377
|
|
|
|
730
|
|
|
|
1,176
|
|
Restructuring costs (note 9)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
773
|
|
Impairment (reversal) of right of use asset
|
|
|
—
|
|
|
|
(125
|
)
|
|
|
—
|
|
|
|
276
|
|
Gain on modification of building lease (notes 6 and 10)
|
|
|
—
|
|
|
|
—
|
|
|
|
(219
|
)
|
|
|
—
|
|
Impairment of prepaid asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
169
|
|
Total operating expenses (note 14)
|
|
|
1,868
|
|
|
|
2,091
|
|
|
|
5,743
|
|
|
|
8,993
|
|
Loss from operations
|
|
|
(1,740
|
)
|
|
|
(1,808
|
)
|
|
|
(4,457
|
)
|
|
|
(8,479
|
)
|
Gain due to changes in foreign currency exchange rates
|
|
|
211
|
|
|
|
3
|
|
|
|
237
|
|
|
|
61
|
|
Gain on change in fair value of warrant liability (note 11)
|
|
|
816
|
|
|
|
2,120
|
|
|
|
1,147
|
|
|
|
3,985
|
|
Other finance (costs)
|
|
|
(423
|
)
|
|
|
(646
|
)
|
|
|
(734
|
)
|
|
|
(603
|
)
|
Net finance income
|
|
|
604
|
|
|
|
1,477
|
|
|
|
650
|
|
|
|
3,443
|
|
Net (loss)
|
|
|
(1,136
|
)
|
|
|
(331
|
)
|
|
|
(3,807
|
)
|
|
|
(5,036
|
)
|
Other comprehensive (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(483
|
)
|
|
|
377
|
|
|
|
(482
|
)
|
|
|
351
|
|
Items that will not be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (loss) on defined benefit plans (note 12)
|
|
|
(635
|
)
|
|
|
(536
|
)
|
|
|
(665
|
)
|
|
|
(2,027
|
)
|
Comprehensive (loss)
|
|
|
(2,254
|
)
|
|
|
(490
|
)
|
|
|
(4,954
|
)
|
|
|
(6,712
|
)
|
Net (loss) per share [basic and diluted]
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.11
|
)
|
|
|
(0.31
|
)
|
Weighted average number of shares outstanding (note 19):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
56,211,486
|
|
|
|
16,887,819
|
|
|
|
33,832,136
|
|
|
|
16,651,969
|
|
Diluted
|
|
|
56,211,486
|
|
|
|
16,887,819
|
|
|
|
33,832,136
|
|
|
|
16,651,969
|
|
The
accompanying notes are an integral part of these condensed interim consolidated financial statements.
Condensed
Interim Consolidated Statements of Cash Flows
For
the three AND nine months ended September 30, 2020 and 2019
(In
thousands of US dollars, except share and per share data)
(Unaudited)
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) for the period
|
|
|
(1,136
|
)
|
|
|
(331
|
)
|
|
|
(3,807
|
)
|
|
|
(5,036
|
)
|
Items not affecting cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) on change in fair value of warrant liability (note 11)
|
|
|
(816
|
)
|
|
|
(2,120
|
)
|
|
|
(1,147
|
)
|
|
|
(3,985
|
)
|
Transaction costs of warrants issued and expensed as finance cost (note 13)
|
|
|
422
|
|
|
|
545
|
|
|
|
732
|
|
|
|
545
|
|
Provision for restructuring costs utilized (note 9)
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
(359
|
)
|
|
|
773
|
|
Depreciation and amortization
|
|
|
42
|
|
|
|
119
|
|
|
|
188
|
|
|
|
255
|
|
Impairment (reversal) of right of use asset
|
|
|
—
|
|
|
|
(125
|
)
|
|
|
—
|
|
|
|
276
|
|
Impairment of prepaid asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
169
|
|
Gain on modification of building lease (notes 6 and 10)
|
|
|
—
|
|
|
|
—
|
|
|
|
(219
|
)
|
|
|
—
|
|
Share-based compensation costs
|
|
|
68
|
|
|
|
55
|
|
|
|
45
|
|
|
|
745
|
|
Employee future benefits (note 12)
|
|
|
58
|
|
|
|
60
|
|
|
|
157
|
|
|
|
196
|
|
Amortization of deferred revenues
|
|
|
(27
|
)
|
|
|
(19
|
)
|
|
|
(64
|
)
|
|
|
(55
|
)
|
Foreign exchange (loss) on items denominated in foreign currencies
|
|
|
(263
|
)
|
|
|
(12
|
)
|
|
|
(295
|
)
|
|
|
(61
|
)
|
Gain on disposal of property, plant and equipment
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(6
|
)
|
Other non-cash items
|
|
|
2
|
|
|
|
—
|
|
|
|
9
|
|
|
|
—
|
|
Interest accretion on lease liabilities (note 10)
|
|
|
(2
|
)
|
|
|
(15
|
)
|
|
|
(17
|
)
|
|
|
(53
|
)
|
Payment of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,448
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities (note 15)
|
|
|
(130
|
)
|
|
|
(749
|
)
|
|
|
(420
|
)
|
|
|
(1,534
|
)
|
Net cash used in operating activities
|
|
|
(1,793
|
)
|
|
|
(2,595
|
)
|
|
|
(6,647
|
)
|
|
|
(7,771
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares and warrants (notes 13 and 11, respectively)
|
|
|
19,000
|
|
|
|
4,988
|
|
|
|
23,500
|
|
|
|
4,988
|
|
Transaction costs (note 13)
|
|
|
(2,158
|
)
|
|
|
(786
|
)
|
|
|
(2,767
|
)
|
|
|
(786
|
)
|
Proceeds from exercise of warrants, options and deferred share units
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
314
|
|
Payments on lease liabilities (note 10)
|
|
|
(49
|
)
|
|
|
(152
|
)
|
|
|
(248
|
)
|
|
|
(462
|
)
|
Net cash provided by financing activities
|
|
|
16,793
|
|
|
|
4,050
|
|
|
|
20,485
|
|
|
|
4,054
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from disposal of property, plant and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
Change in restricted cash equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
50
|
|
|
|
50
|
|
Net cash provided by investing activities
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
50
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
3
|
|
|
|
(276
|
)
|
|
|
14
|
|
|
|
17
|
|
Net change in cash and cash equivalents
|
|
|
15,003
|
|
|
|
1,179
|
|
|
|
13,908
|
|
|
|
(3,650
|
)
|
Cash and cash equivalents – Beginning of period
|
|
|
6,743
|
|
|
|
9,683
|
|
|
|
7,838
|
|
|
|
14,512
|
|
Cash and cash equivalents – End of period
|
|
|
21,746
|
|
|
|
10,862
|
|
|
|
21,746
|
|
|
|
10,862
|
|
The
accompanying notes are an integral part of these condensed interim consolidated financial statements.
Notes to Condensed Interim Consolidated Financial Statements
As at SEPTEMBER 30, 2020 and for the three AND nine months ended September 30, 2020 and 2019
(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)
1.
|
Summary
of business and liquidity and basis of preparation
|
Summary
of business and liquidity
Aeterna
Zentaris Inc. (“Aeterna Zentaris” or the “Company”) is a specialty biopharmaceutical company commercializing
and developing therapeutics and diagnostic tests. The Company’s lead product, Macrilen™ (macimorelin), is the first
and only United States Food and Drug Administration (“FDA”) and European Commission approved oral test indicated for
the diagnosis of patients with adult growth hormone deficiency (“AGHD”). Macrilen™ (macimorelin) is currently
marketed in the U.S. through a license and assignment agreement (the “License Agreement”) with Novo Nordisk A/S (“Novo”).
Aeterna Zentaris is also pursuing the development of macimorelin for the diagnosis of child-onset growth hormone deficiency (“CGHD”),
an area of significant unmet need. In addition, we are actively pursuing business development opportunities for the commercialization
of macimorelin in Europe and the rest of the world in addition to other non-strategic assets to monetize their value.
The
Company’s principal focus is on the commercialization of Macrilen™ (macimorelin) and it currently does not have any
other approved products. Under the terms of License Agreement, Novo is funding 70% of the pediatric clinical trial submitted to
the European Medicines Agency (“EMA”) and FDA, the Company’s sole development activity. In November 2019, Novo
contracted the Company’s wholly owned German subsidiary (“AEZS Germany”) to provide supply chain services for
the manufacture of Macrilen™ (macimorelin). In April 2020, we announced the results from AEZS-130-P01 (“Study P01”)
to establish a dose that can both be safely administered to pediatric patients and cause a clear rise in growth hormone concentration
in subjects ultimately diagnosed as not having growth hormone deficiency. The Company plans to proceed with the pivotal second
study, AEZS-130-P02 (“Study P02”), with an expected start date in the first quarter of 2021 and an expected completion
date in July 2022, according to the pediatric investigation plan (“PIP”) agreement with the EMA. Study P02 is designed
to investigate the diagnostic efficacy and safety of macimorelin acetate in pediatric patients from 2 years of age to 18 years
of age with suspected growth hormone deficiency.
Liquidity
As
at September 30, 2020, a limited portion of the Company’s cash is held in AEZS Germany, the Company’s principal operating
subsidiary. AEZS Germany is the counter-party to the License Agreement described above with Novo, and as such, for generating
future revenue earned under the License Agreement. Management considers the cash resources available to AEZS Germany in executing
its obligations under the License Agreement. In September 2019 and February, July and August of 2020 the company completed financings
resulting in total funding (net of transaction costs) of $24,933 (note 13). All of this cash was deposited in AEZS Canada accounts.
As AEZS Germany has a limited portion of the Company’s cash, The parent company can support cash needs of the German subsidiary
from the funds provided through the financing transactions.
COVID-19
impact
In
2020, the COVID-19 pandemic began causing significant financial market declines and social dislocation. The situation is dynamic
with various cities and countries around the world responding in different ways to address the outbreak. The spread of COVID-19
may impact the Company’s operations, including the potential interruption of our clinical trial activities and the Company’s
supply chain, or that of the Company’s licensee. For example, the COVID-19 outbreak may delay enrollment in the Company’s
clinical trials due to prioritization of hospital resources toward the outbreak, and some patients may be unwilling to be enrolled
in the Company’s trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt
healthcare services, which would delay the Company’s ability to conduct clinical trials or release clinical trial results
and could delay the Company’s ability to obtain regulatory approval and commercialize the Company’s product candidates.
The pandemic may also impact the ability of the Company’s suppliers to deliver components or raw materials on a timely basis
or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an
infectious disease. The Company’s licensee may be impacted due to significant delays of diagnostic activities in the U.S.
To date, the Company has not experienced significant business disruption from COVID-19.
Basis
of presentation
These
unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board (“IFRS”) applicable to the preparation of interim
financial statements, including IAS 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial
statements should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year
ended December 31, 2019.
These
unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the “Board”)
on November 5, 2020.
The
accounting policies in these condensed interim consolidated financial statements are consistent with those presented in the Company’s
annual consolidated financial statements except as noted below:
Share
purchase warrants
The
Company accounts for share purchase warrants that meet the fixed-for-fixed criteria as equity-settled. Such share purchase warrants
are accounted for by using the relative fair value method whereby the total gross proceeds of the financing are allocated to each
of common shares and share purchase warrants based on their relative fair values.
Deferred
share units
Deferred
share units (“DSUs”) are classified as other capital. The Company grants DSUs to members of its Board of Directors
who are not employees or officers of the Company. DSUs cannot be redeemed until the holder is no longer a director of the Company
and are considered equity-settled instruments. Under the terms of the DSU agreement, the DSUs vest immediately upon grant. The
value attributable to the DSUs is based on the market value of the share price at the time of grant and share based compensation
expense is recognized in general and administrative expenses on the consolidated statements of loss and comprehensive (loss) income.
At the time of redemption, each DSU may be exchanged for one common share of the Company.
Any
consideration received by the Company in connection with the exercise of DSUs is credited to share capital. Any other capital
component of the share-based compensation is transferred to share capital upon the issuance of shares.
2.
|
Critical
accounting estimates and judgements
|
The
preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and
related disclosures. Judgments, estimates and assumptions are based on historical experience, expectations, current trends and
other factors that management believes to be relevant at the time at which the Company’s condensed interim consolidated
financial statements are prepared.
Management
reviews, on a regular basis, the Company’s accounting policies, assumptions, estimates and judgments in order to ensure
that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Measurement
uncertainty:
The
significant spread of COVID-19 within the U.S., Canada, Germany and elsewhere has resulted in a widespread health crisis and has
had adverse effects on local, national and global economies generally, the markets the Company serves, its operations and the
market price of its common shares.
Uncertain
factors, including the duration of the outbreak, the severity of the disease and the actions to contain or treat its impact, could
cause interruptions in the Company’s operations and supply chain, which could impact the Company’s ability to accurately
measure the net realizable value of inventory and fair value of trade and other receivables.
Critical
accounting estimates and assumptions, as well as critical judgments used in applying accounting policies in the preparation of
the Company’s condensed interim consolidated financial statements, were the same as those applied to the Company’s
annual consolidated financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018.
3.
|
Impact
of adoption of new IFRS standards in 2020
|
|
(a)
|
IAS
1 Presentation of financial statements and IAS 8 Accounting policies, changes in accounting estimates and errors (amendment)
|
The
amendments to IAS 1 and IAS 8 clarify the definition of material and seek to align the definition used in the Conceptual Framework
with that in the standards themselves as well as ensuring the definition of material is consistent across all IFRS. The Company
adopted these amendments effective January 1, 2020. The adoption of these amendments did not have a significant impact on the
Company’s condensed interim consolidated financial statements.
|
(b)
|
Conceptual
framework for financial reporting
|
Together
with the revised Conceptual Framework published in March 2018, the IASB also issued Amendments to References to the Conceptual
Framework in IFRS Standards. The Company adopted the Revised Conceptual Framework effective January 1, 2020. The adoption of these
amendments did not have a significant impact on the Company’s condensed interim consolidated financial statements.
IFRS
Pronouncements issued but not yet effective
|
(c)
|
IAS
1 – Presentation of financial statements
|
The
amendment to IAS 1 clarifies how to classify debt and other liabilities as either current or non-current. The amendment will be
effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts
on its consolidated financial statements.
|
(d)
|
Annual
improvements to IFRS standards 2018-2020
|
The
annual improvements process addresses issues in the 2018-2020 reporting cycles including changes to IFRS 9, Financial Instruments,
IFRS 1, First Time adoption of IFRS, IFRS 16, Leases, and IAS 41, Biological Assets.
i)
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities.
ii)
The amendment to IFRS 1 allows a subsidiary adopting IFRS at a later date than its parent to also measure cumulative translation
differences using the amounts reported by the parent based on the parent’s date of transition to IFRS.
iii)
The amendment to IFRS 16’s illustrative example 13 removes the illustration of payments from the lessor related to leasehold
improvements.
These
amendments will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the
new guidance and impacts on its consolidated financial statements.
|
(e)
|
IAS
37 - Onerous contracts - Cost of fulfilling a contract
|
The
amendment to IAS 37 clarifies the meaning of costs to fulfil a contract and that before a separate provision for an onerous contract
is established, an entity recognizes any impairment loss that has occurred on assets used in fulfilling the contract, rather than
on assets dedicated to the contract. This amendment will be effective for annual periods beginning on or after January 1, 2022.
The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
|
(f)
|
IAS
16 - Proceeds before intended use
|
The
amendment to IAS 16 prohibits an entity from deducting from the cost of an item of Property, plant and equipment any proceeds
received from selling items produced while the entity is preparing the assets for its intended use (for example, the proceeds
from selling samples produced when testing a machine to see if it is functioning properly). It also clarifies that an entity is
testing whether the asset is functioning properly when it assesses the technical and physical performance of the asset. The amendment
also requires certain related disclosures. This amendment will be effective for annual periods beginning on or after January 1,
2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
4.
|
Licensing
arrangement and supply chain agreement
|
On
January 16, 2018, the Company entered into the License Agreement which provides (i) for the “right to use” license
relating to the Adult Indication, (ii) for the right to acquire a license for the Pediatric Indication if and when the FDA approves
a pediatric indication, (iii) that the licensee is to fund 70% of the costs of a pediatric clinical trial submitted for approval
to the EMA under the agreed Pediatric Investigation Plan (“PIP”) studies to be run by the Company with customary oversight
from a joint steering committee (the “JSC”) and (iv) an interim supply arrangement (“Supply Arrangement”).
Strongbridge Ireland Limited (“Strongbridge”), effective December 19, 2018, sold the U.S. and Canadian rights to Macrilen™
(macimorelin) to Novo for a payment plus tiered royalties on net sales. The service agreement under which Novo agreed to fund
Strongbridge’s Macrilen™ (macimorelin) field organization as a contract field force to promote the product in the
U.S. was terminated as of December 1, 2019.
Following
Novo’s acquisition of the U.S. and Canadian rights to Macrilen™ (macimorelin), the JSC has met regularly to discuss
Novo’s commercialization plan for the U.S. and Canada, their supply chain needs and the enrollment of patients and protocols
of the two PIP studies. The Company expects that quarterly meetings will continue as forecasts for sales, inventory build and
needs for the PIP study progresses.
Royalty
income earned under the License Agreement for the nine-month period ended September 30, 2020 was $47 (2019 - $29) and, during
the nine-month period ended September 30, 2020, the Company invoiced Novo $324 for its share of PIP study costs (2019 - $809)
that are recorded within research and development costs on the condensed interim consolidated statements of comprehensive loss.
The
Company agreed, in the Supply Arrangement to the License Agreement, to supply ingredients for the manufacture of Macrilen™
(macimorelin) during an interim period at a price that is set ‘at cost’ without any profit margin. In November 2019,
Novo contracted AEZS Germany, to provide supply chain services including API batch production and delivery of certain Active Pharmaceutical
Ingredients (“API”) and semi-finished goods, as well as the provision of ongoing support activities. During the nine-month
period ended September 30, 2020, the Company invoiced Novo $153 for supply chain activities and recognized as revenue $150 (2019
– $968 invoiced and recognized as revenue $288) and invoiced and recognized as revenue $1,016 in product sales (2019 - $129).
5.
|
Trade
and other receivables
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
$
|
|
|
$
|
|
Trade accounts receivable (net of expected credit losses of $55 (December 31, 2019 - $55))
|
|
|
61
|
|
|
|
210
|
|
Value added tax and income tax receivable
|
|
|
587
|
|
|
|
254
|
|
Other
|
|
|
193
|
|
|
|
194
|
|
|
|
|
841
|
|
|
|
658
|
|
|
|
Building
|
|
|
Vehicles and equipment
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2020
|
|
|
757
|
|
|
|
106
|
|
|
|
863
|
|
Modification of building lease
|
|
|
(259
|
)
|
|
|
—
|
|
|
|
(259
|
)
|
Disposals
|
|
|
—
|
|
|
|
(21
|
)
|
|
|
(21
|
)
|
Impact of foreign exchange rate changes
|
|
|
22
|
|
|
|
4
|
|
|
|
26
|
|
At September 30, 2020
|
|
|
520
|
|
|
|
89
|
|
|
|
609
|
|
|
|
Building
|
|
|
Vehicles and equipment
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2020
|
|
|
242
|
|
|
|
39
|
|
|
|
281
|
|
Disposals
|
|
|
—
|
|
|
|
(20
|
)
|
|
|
(20
|
)
|
Depreciation
|
|
|
142
|
|
|
|
23
|
|
|
|
165
|
|
Impact of foreign exchange rate changes
|
|
|
11
|
|
|
|
1
|
|
|
|
12
|
|
At September 30, 2020
|
|
|
395
|
|
|
|
43
|
|
|
|
438
|
|
|
|
Building
|
|
|
Vehicles and equipment
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Carrying amount
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2020
|
|
|
125
|
|
|
|
46
|
|
|
|
171
|
|
As at December 31, 2019
|
|
|
515
|
|
|
|
67
|
|
|
|
582
|
|
Upon
the renegotiation of the building lease agreement completed effective April 30, 2020 (note 10), a modification was recorded to
the building right of use asset in the amount of $259, representing the reduction in the square footage leased from the landlord.
The
change in carrying value is as follows:
|
|
Carrying amount
|
|
|
|
$
|
|
At January 1, 2019
|
|
|
8,210
|
|
Impact of foreign exchange rate changes
|
|
|
(160
|
)
|
At December 31, 2019
|
|
|
8,050
|
|
Impact of foreign exchange rate changes
|
|
|
356
|
|
At September 30, 2020
|
|
|
8,406
|
|
8.
|
Payables
and accrued liabilities
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
$
|
|
|
$
|
|
Trade accounts payable
|
|
|
308
|
|
|
|
1,087
|
|
Salaries, employment taxes and benefits
|
|
|
113
|
|
|
|
64
|
|
Accrued audit fees
|
|
|
130
|
|
|
|
216
|
|
PIP study payables
|
|
|
—
|
|
|
|
118
|
|
Accrued severance
|
|
|
57
|
|
|
|
427
|
|
Other accrued liabilities
|
|
|
328
|
|
|
|
236
|
|
|
|
|
936
|
|
|
|
2,148
|
|
9.
|
Provision
for restructuring and other costs
|
On
June 6, 2019, the Company announced that it was reducing the size of its German workforce to more closely reflect the Company’s
ongoing commercial activities in Frankfurt. AEZS Germany and its Works Council approved a restructuring that affected 8 employees
that was completed by January 31, 2020.
The
changes in the Company’s provision for restructuring and other costs can be summarized as follows:
|
|
Cetrotide(R) onerous contracts
|
|
|
German Restructuring: severance
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance – January 1, 2020
|
|
|
396
|
|
|
|
330
|
|
|
|
726
|
|
Utilization of provision
|
|
|
(36
|
)
|
|
|
(323
|
)
|
|
|
(359
|
)
|
Change in provision
|
|
|
11
|
|
|
|
—
|
|
|
|
11
|
|
Impact of foreign exchange rate changes
|
|
|
17
|
|
|
|
(7
|
)
|
|
|
10
|
|
Balance – September 30, 2020
|
|
|
388
|
|
|
|
—
|
|
|
|
388
|
|
Less current portion
|
|
|
117
|
|
|
|
—
|
|
|
|
117
|
|
Non-current portion
|
|
|
271
|
|
|
|
—
|
|
|
|
271
|
|
|
|
Nine months ended
|
|
|
Year ended
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Balance – Beginning of period
|
|
|
903
|
|
|
|
1,522
|
|
Interest paid as charged to comprehensive income (loss) as other finance costs
|
|
|
(17
|
)
|
|
|
(66
|
)
|
Payment against lease liabilities
|
|
|
(248
|
)
|
|
|
(614
|
)
|
Modification of lease liability
|
|
|
(463
|
)
|
|
|
—
|
|
Impact of foreign exchange rate changes
|
|
|
26
|
|
|
|
61
|
|
Balance – End of period
|
|
|
201
|
|
|
|
903
|
|
Current lease liabilities
|
|
|
125
|
|
|
|
648
|
|
Non-current lease liabilities
|
|
|
76
|
|
|
|
255
|
|
Effective
March 31, 2020, the Company and its landlord mutually agreed to modify its existing building lease agreement for its German subsidiary,
extended the lease term for its portion of the reduced space from April 30, 2021 to March 31, 2022 and, retained one sub-lessee
until April 30, 2021.
On
May 5, 2020, the sub-lessee terminated its lease with the Company effective April 30, 2020. Concurrent with this termination,
the Company was able to renegotiate a further reduction in leased square footage with the landlord, which resulted in a lease
modification and a resulting gain of $34 which was recorded in the condensed interim consolidated statements of comprehensive
loss.
The
change in the Company’s warrant liability can be summarized as follows:
|
|
Nine months ended
|
|
|
Year ended
|
|
|
|
|
September 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Balance – Beginning of period
|
|
|
2,255
|
|
|
|
3,634
|
|
Issuance of warrants (a)
|
|
|
6,269
|
|
|
|
3,457
|
|
Warrants exercised during the period
|
|
|
—
|
|
|
|
(318
|
)
|
Net gain on change in fair value of warrant liability
|
|
|
(1,147
|
)
|
|
|
(4,518
|
)
|
Warrant liability reclassified to equity (b)
|
|
|
(7,377
|
)
|
|
|
—
|
|
Balance – End of period
|
|
|
—
|
|
|
|
2,255
|
|
Current portion of warrant liability
|
|
|
—
|
|
|
|
6
|
|
Long-term portion of warrant liability
|
|
|
—
|
|
|
|
2,249
|
|
The
table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine
the fair value of all warrants outstanding as at September 30, 2020.
|
|
|
Number of equivalent shares
|
|
|
Market value per share price
|
|
|
Weighted average exercise price
|
|
|
Risk-free annual interest rate
|
|
|
Expected volatility
|
|
|
Expected life (years)
|
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
(i)
|
|
|
(ii)
|
|
|
(iii)
|
|
|
(iv)
|
|
December 2015 Warrants
|
|
|
|
2,331,000
|
|
|
|
0.351
|
|
|
|
7.10
|
|
|
|
0.11996
|
%
|
|
|
65.47
|
%
|
|
|
0.21
|
|
|
|
0.00
|
%
|
|
(i)
|
Based
on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
|
|
(ii)
|
Based
on the historical volatility of the Company’s stock price over the most recent period consistent with the expected life
of the warrants, as well as on future expectations.
|
|
(iii)
|
Based
upon time to expiry from the reporting period date.
|
|
(iv)
|
The
Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.
|
A
summary of the activity related to the Company’s share purchase warrants that are classified as a liability is provided
below.
|
|
Nine months ended
|
|
|
Year ended
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
Number
|
|
|
Weighted average exercise price
|
|
|
Number
|
|
|
Weighted average exercise price
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
Balance – Beginning of period
|
|
|
6,629,144
|
|
|
|
4.00
|
|
|
|
3,391,844
|
|
|
|
6.23
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
(87,700
|
)
|
|
|
1.07
|
|
Issued (a)
|
|
|
13,043,033
|
|
|
|
0.65
|
|
|
|
3,325,000
|
|
|
|
1.65
|
|
Reclassified to equity (b)
|
|
|
(16,368,033
|
)
|
|
|
0.86
|
|
|
|
—
|
|
|
|
—
|
|
Expired (c)
|
|
|
(973,144
|
)
|
|
|
4.60
|
|
|
|
—
|
|
|
|
—
|
|
Balance – End of period
|
|
|
2,331,000
|
|
|
|
7.10
|
|
|
|
6,629,144
|
|
|
|
4.00
|
|
2020
On
February 21, 2020, the Company closed a registered direct offering for 3,478,261 common shares, at a purchase price of $1.29 per
share, priced at-the-market (note 13). Additionally, the Company issued to the investors unregistered warrants to purchase up
to an aggregate of 2,608,696 common shares in a concurrent private placement. The warrants have an exercise price of $1.20 per
common share, are exercisable immediately and will expire five and one-half years following the date of issuance. The Company
also issued 243,478 warrants to the placement agent with an exercise price of $1.62 per common share, which are exercisable immediately
and will expire five years following the date of issuance.
On
August 5, 2020, the Company closed a securities purchase agreement with several institutional investors in the United States providing
for the sale and issuance of 12,427,876 common shares at a purchase price of $0.56325 per common share in a registered direct
offering priced at-the-market under Nasdaq rules. The offering resulted in gross proceeds of approximately $7,000. Concurrently,
the Company issued to the purchasers unregistered warrants to purchase up to an aggregate of 9,320,907 common shares. The warrants
are exercisable for a period of five and one-half years, exercisable immediately following the issuance date and have an exercise
price of $0.47 per common share. In addition, the Company issued unregistered warrants to the placement agent to purchase up to
an aggregate of 869,952 common shares, with an exercise price of $0.7040625 per share and an expiration date of August 3, 2025.
2019
On
September 20, 2019, the Company entered into a securities purchase agreement for $4,988 (before total transaction costs of $786)
of its common shares in a registered direct offering and warrants to purchase common shares in a concurrent private placement
(together, the “Offering”). The combined purchase price for one common share and one warrant was $1.50 (note 13).
Under the terms of the securities purchase agreement, the Company sold 3,325,000 common shares. In a concurrent private placement,
the Company issued warrants to purchase up to an aggregate of 3,325,000 common shares. The warrants are exercisable commencing
six months from the date of issuance, have an exercise price of $1.65 per share and expire 5 years following the date of issuance.
All
issued warrants contain a provision where if, at any time while the warrants are outstanding, the Company completes a Fundamental
Transaction (as defined in the warrant agreements) but is generally understood to be a change of control of the Company, the warrant
holders will have the right to receive payment for the unexercised warrant (as defined in the warrant agreements).
|
(b)
|
Warrant
liability reclassified to equity
|
The
Company had issued 3,325,000 unregistered investor warrants in the September 2019 closed direct offering as well as 2,608,696
unregistered investor warrants and 243,478 unregistered placement agent warrants in the February 2020 closed direct offering transaction.
The terms of the warrant agreement stated that if the warrants remained unregistered, the warrant holder could elect to exercise
the warrants by way of a cashless exercise. This violated the fixed-for-fixed criterion due to the cashless exercise option, and
accordingly these warrants had been accounted for as a liability.
Effective
June 16, 2020, the Company registered the common shares underlying these warrants by way of a registration statement which eliminated
the cashless exercise option on the warrants, on a one-for-one basis. Accordingly, as of June 16, 2020, the warrant liability
was remeasured at fair value using the Black-Scholes option pricing model, with the amount of the remeasurement loss recognized
in the condensed interim consolidated statements of comprehensive loss. The carrying value of the warrants was then reclassified
from warrant liability to other capital within equity (note 13).
The
Company also issued 9,320,907 unregistered investor warrants and 869,952 unregistered placement agent warrants in the August 2020
registered direct offering transaction. The terms of the warrant agreement stated that if the warrants remained unregistered,
the warrant holder could elect to exercise the warrants by way of a cashless exercise. This violated the fixed-for-fixed criterion
due to the cashless exercise option, and accordingly these warrants were accounted for as a liability on issuance and measured
at fair value using the Black-Scholes option pricing model.. Effective September 14, 2020, the Company registered the common shares
underlying these warrants by way of a registration statement which eliminated the cashless exercise option on the warrants, on
a one-for-one basis. Accordingly, as of September 14, 2020, the warrant liability was remeasured at fair value using the Black-Scholes
option pricing model, with the amount of the remeasurement loss recognized in the condensed interim consolidated statements of
comprehensive loss. The carrying value of the warrants was then reclassified from warrant liability to other capital within equity
(note 13).
The
table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine
the fair value of such warrants as at the noted dates of reclassification:
|
|
Number
of equivalent shares
|
|
|
Market
value per share price
|
|
|
Weighted
average exercise price
|
|
|
Risk-
free
annual interest rate
|
|
|
Expected
volatility
|
|
|
Expected
life (years)
|
|
|
Expected
dividend yield
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
(i)
|
|
|
(ii)
|
|
|
(iii)
|
|
|
(iv)
|
|
As
at June 16, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
2019 Warrants
|
|
|
3,325,000
|
|
|
|
0.96
|
|
|
|
1.65
|
|
|
|
0.30
|
%
|
|
|
104.5
|
%
|
|
|
4.3
|
|
|
|
0.00
|
%
|
February
2020 Investor Warrants
|
|
|
2,608,696
|
|
|
|
0.96
|
|
|
|
1.20
|
|
|
|
0.36
|
%
|
|
|
119.3
|
%
|
|
|
5.2
|
|
|
|
0.00
|
%
|
February
2020 Placement Agent Warrants
|
|
|
243,478
|
|
|
|
0.96
|
|
|
|
1.62
|
|
|
|
0.32
|
%
|
|
|
113.3
|
%
|
|
|
4.7
|
|
|
|
0.00
|
%
|
As
at September 14, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
2020 Investor Warrants
|
|
|
9,320,907
|
|
|
|
0.38
|
|
|
|
0.47
|
|
|
|
0.31
|
%
|
|
|
120.5
|
%
|
|
|
5.4
|
|
|
|
0.00
|
%
|
August
2020 Placement Agent Warrants
|
|
|
869,952
|
|
|
|
0.38
|
|
|
|
0.704063
|
|
|
|
0.26
|
%
|
|
|
114.6
|
%
|
|
|
4.9
|
|
|
|
0.00
|
%
|
|
(i)
|
Based
on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
|
|
(ii)
|
Based
on the historical volatility of the Company’s stock price over the most recent period consistent with the expected life
of the warrants, as well as on future expectations.
|
|
(iii)
|
Based
upon time to expiry from the reporting period date.
|
|
(iv)
|
The
Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.
|
On
March 10, 2020, the Company had 28,144 share purchase warrants expire, each with an exercise price of $1.07. On May 1, 2020, the
Company had 945,000 share purchase warrants expire, each with an exercise price of $4.70.
12.
|
Employee
future benefits
|
The
Company sponsors a pension plan in Germany (The Aeterna Zentaris GmbH Pension Plan). The change in the Company’s accrued
benefit obligations is summarized as follows:
|
|
September 30, 2020
|
|
|
Year ended December 31, 2019
|
|
|
|
Pension benefit plans
|
|
|
Other benefit plans
|
|
|
Total
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balances – Beginning of the period
|
|
|
13,705
|
|
|
|
83
|
|
|
|
13,788
|
|
|
|
13,205
|
|
Current service cost
|
|
|
36
|
|
|
|
2
|
|
|
|
38
|
|
|
|
49
|
|
Interest cost
|
|
|
118
|
|
|
|
1
|
|
|
|
119
|
|
|
|
241
|
|
Actuarial loss arising from changes in financial assumptions
|
|
|
665
|
|
|
|
—
|
|
|
|
665
|
|
|
|
1,040
|
|
Benefits paid
|
|
|
(335
|
)
|
|
|
(3
|
)
|
|
|
(338
|
)
|
|
|
(483
|
)
|
Impact of foreign exchange rate changes
|
|
|
575
|
|
|
|
4
|
|
|
|
579
|
|
|
|
(264
|
)
|
Balances – End of the period
|
|
|
14,764
|
|
|
|
87
|
|
|
|
14,851
|
|
|
|
13,788
|
|
Amounts recognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In net loss
|
|
|
(154
|
)
|
|
|
(3
|
)
|
|
|
(157
|
)
|
|
|
(262
|
)
|
In other comprehensive loss
|
|
|
1,240
|
|
|
|
4
|
|
|
|
1,244
|
|
|
|
(810
|
)
|
The
calculation of the pension benefit obligation is sensitive to the discount rate assumption. Discount rates were 1.1% at December
31, 2019, 1.8% at March 31, 2020, 1.1% at June 30, 2020 and 0.8% at September 30, 2020.
13.
|
Share
and other capital
|
The
Company has an unlimited number of authorized common shares (being voting and participating shares) with no par value, as well
as an unlimited number of preferred, first and second ranking shares, issuable in series, with rights and privileges specific
to each class, with no par value.
2020
On
February 21, 2020, the Company closed a registered direct offering for 3,478,261 common shares, at a purchase price of $1.29 per
share, priced at-the-market. Additionally, 2,608,696 investor share purchase warrants were issued at an exercise price of $1.20
per common share and 243,478 broker share purchase warrants were issued at an exercise price of $1.62 per common share (note 11(a)).
The net cash proceeds to the Company from the offering totaled $3,900. The gross proceeds of $4,500 was allocated as $2,325 to
warrant liability based on the ascribed fair value (note 11) and the remaining gross proceeds of $2,174 were allocated to share
capital. The transaction costs of $600 were allocated between share capital and warrants based on their relative fair values.
The fair value of the share capital was recorded within equity net of the allocated transaction costs. The transaction costs of
$310 allocated to the warrant liability were recorded as expense in the statement of comprehensive loss.
During
the second quarter of 2020, directors who were no longer on the Board redeemed their DSUs in full whereby 111,300 common shares
were issued.
On
July 7, 2020, the Company closed a public offering of 26,666,666 units at a price of $0.45 per unit, for net cash proceeds to
the Company of $10,596. Each unit contained one common share (or common share equivalent in lieu thereof) and one investor share
purchase warrant to purchase one common share. In total, 26,666,666 common shares, 26,666,666 investor share purchase warrants
at an exercise price of $0.45 per share expiring July 7, 2025 and 1,866,667 placement agent warrants with an exercise price of
$0.5625 per share, expiring July 1, 2025 were issued. As these warrants were registered and can be settled for a fixed number
of the Company’s underlying common shares, the warrants meet the requirements of the fixed-for-fixed rule and have been
classified as equity.
Because
the warrants were classified as equity, the gross proceeds of $12,000 was allocated as $6,308 to share capital and $5,691 to share
purchase warrants based on their relative fair values. The transaction costs of $1,420 were reduced from share capital and share
purchase warrants and charged to share issuance costs and classified as equity. The values ascribed to the share capital and share
purchase warrants were recorded within equity, net of the allocated transaction costs.
On
August 5, 2020, the Company closed a securities purchase agreement of 12,427,876 common shares at a purchase price of $0.56325
per common share. The offering resulted in gross proceeds of $7,000. Concurrently, the Company issued to the purchasers unregistered
warrants to purchase up to an aggregate of 9,320,907 common shares. The warrants are exercisable for a period of five and one-half
years, exercisable immediately following the issuance date and have an exercise price of $0.47 per common share. In addition,
the Company issued unregistered warrants to the placement agent to purchase up to an aggregate of 869,952 common shares, with
an exercise price of $0.7040625 per share and an expiration date of August 3, 2025. The gross proceeds of $7,000 was allocated
as $3,944 to warrant liability based on the ascribed fair value (note 11) and the remaining gross proceeds of $3,056 were allocated
to share capital. The transaction costs of $747were allocated between share capital and warrants based on their relative fair
values. The fair value of the share capital was recorded within equity net of the allocated transaction costs of $327. The transaction
costs of $421 allocated to the warrant liability were recorded as expense in the statement of comprehensive loss.
2019
On
September 20, 2019, the Company entered into a securities purchase agreement with U.S. institutional investors to purchase $4,988
(before total transaction costs of $786) of its common shares in a registered direct offering and warrants to purchase common
shares in a concurrent private placement (together, the “Offering”). The combined purchase price for one common share
and one warrant was $1.50. Under the terms of the securities purchase agreement, the Company sold 3,325,000 common shares. In
a concurrent private placement, the Company issued warrants to purchase up to an aggregate of 3,325,000 common shares (note 11(a)).
The gross proceeds of $4,988 was allocated as $3,457 to warrants based on the ascribed fair value and the remaining gross proceeds
of $1,531 were allocated to share capital. The transaction costs of $795 were allocated between share capital and warrants based
on their relative fair values. The fair value of the share capital was recorded within equity net of the allocated transaction
costs. The transaction costs of $550 allocated to the warrant liability were recorded as expense in the statement of comprehensive
(loss) income.
Shareholder
rights plan
Effective
May 8, 2019, the shareholders re-approved the Company’s shareholder rights plan (the “Rights Plan”) that provides
the Board and the Company’s shareholders with additional time to assess any unsolicited take-over bid for the Company and,
where appropriate, to pursue other alternatives for maximizing shareholder value. Under the Rights Plan, one right has been issued
for each currently issued common share, and one right will be issued with each additional common share that may be issued from
time to time.
Other
capital
The
Company accounts for costs associated with share-based compensation from security grants under its long-term incentive plan (the
“LTIP”) and stock option plans as other capital in its consolidated statements of changes in shareholders’ equity
(deficiency) and as operating expenses in its condensed interim consolidated statements of comprehensive loss.
The
following tables summarize the activity under the LTIP and the Stock Option Plan:
|
|
Nine months ended
September 30, 2020
|
|
|
|
US$ Stock options
|
|
|
Weighted average exercise price
|
|
|
DSUs
|
|
|
CAN$ Stock options
|
|
|
Weighted average exercise price
|
|
September 30, 2020
|
|
(Number)
|
|
|
(US$)
|
|
|
(Number)
|
|
|
(Number)
|
|
|
(CAN$)
|
|
Balance – Beginning
of period
|
|
|
741,116
|
|
|
|
3.61
|
|
|
|
212,000
|
|
|
|
441
|
|
|
|
912.00
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
120,000
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
(159,000
|
)
|
|
|
—
|
|
|
|
—
|
|
Canceled/Forfeited
|
|
|
(330,350
|
)
|
|
|
2.14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
(84,366
|
)
|
|
|
15.51
|
|
|
|
—
|
|
|
|
(431
|
)
|
|
|
912.00
|
|
Balance – End of period
|
|
|
326,400
|
|
|
|
2.03
|
|
|
|
173,000
|
|
|
|
10
|
|
|
|
912.00
|
|
|
|
Year ended
December 31, 2019
|
|
|
|
US$ Stock options
|
|
|
Weighted average exercise price
|
|
|
DSUs
|
|
|
CAN$ Stock options
|
|
|
Weighted average exercise price
|
|
December 31, 2019
|
|
(Number)
|
|
|
(US$)
|
|
|
(Number)
|
|
|
(Number)
|
|
|
(CAN$)
|
|
Balance – Beginning of period
|
|
|
727,816
|
|
|
|
4.07
|
|
|
|
161,000
|
|
|
|
869
|
|
|
|
743.56
|
|
Granted
|
|
|
185,000
|
|
|
|
1.07
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
(64,850
|
)
|
|
|
2.75
|
|
|
|
(99,000
|
)
|
|
|
—
|
|
|
|
—
|
|
Canceled/Forfeited
|
|
|
(6,000
|
)
|
|
|
13,39
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
(100,850
|
)
|
|
|
2.24
|
|
|
|
—
|
|
|
|
(428
|
)
|
|
|
570.00
|
|
Balance – End of period
|
|
|
741,116
|
|
|
|
3.61
|
|
|
|
212,000
|
|
|
|
441
|
|
|
|
912.00
|
|
The
following table summarizes the activity regarding warrants that were reclassified into equity:
|
|
Nine months ended
September 30, 2020
|
|
|
Year ended December 31, 2019
|
|
|
|
|
|
|
Weighted average exercise price
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
(US$)
|
|
|
$
|
|
|
$
|
|
Balance – Beginning of the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Nil
|
|
Warrant liability reclassified to equity (note 11(b))
|
|
|
16,368,033
|
|
|
|
0.8556
|
|
|
|
7,377
|
|
|
|
Nil
|
|
Warrants issued as equity (July 2020)
|
|
|
28,533,333
|
|
|
|
0.4574
|
|
|
|
5,691
|
|
|
|
Nil
|
|
Balance – End of the period
|
|
|
44,901,366
|
|
|
|
0.6025
|
|
|
|
13,068
|
|
|
|
Nil
|
|
The
table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine
the fair value of such warrants:
|
|
Number of equivalent shares
|
|
|
Market value per share price
|
|
|
Weighted average exercise price
|
|
|
Risk-
free annual interest rate
|
|
|
Expected volatility
|
|
|
Expected life (years)
|
|
|
Expected dividend yield
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
(i)
|
|
|
(ii)
|
|
|
(iii)
|
|
|
(iv)
|
|
July 2020 Investor Warrants
|
|
|
26,666,666
|
|
|
|
0.52
|
|
|
|
0.45
|
|
|
|
0.2879
|
%
|
|
|
123.1048
|
%
|
|
|
5
|
|
|
|
0.00
|
%
|
July 2020 Placement Agent Warrants
|
|
|
1,866,667
|
|
|
|
0.52
|
|
|
|
0.5625
|
|
|
|
0.2879
|
%
|
|
|
123.1048
|
%
|
|
|
5
|
|
|
|
0.00
|
%
|
|
(i)
|
Based
on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
|
|
(ii)
|
Based
on the historical volatility of the Company’s stock price over the most recent period consistent with the expected life
of the warrants, as well as on future expectations.
|
|
(iii)
|
Based
upon time to expiry from the reporting period date.
|
|
(iv)
|
The
Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.
|
The
nature of the Company’s operating expenses from operations include the following:
|
|
Nine months ended September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
Key management personnel:
|
|
|
|
|
|
|
|
|
Salaries and short-term employee benefits
|
|
|
834
|
|
|
|
835
|
|
Consultant fees
|
|
|
137
|
|
|
|
151
|
|
Share-based compensation costs
|
|
|
143
|
|
|
|
731
|
|
Post-employment benefits
|
|
|
41
|
|
|
|
—
|
|
|
|
|
1,155
|
|
|
|
1,717
|
|
Other employees:
|
|
|
|
|
|
|
|
|
Salaries and short-term employee benefits
|
|
|
837
|
|
|
|
1,318
|
|
Share-based compensation costs
|
|
|
(98
|
)
|
|
|
14
|
|
Post-employment benefits
|
|
|
141
|
|
|
|
262
|
|
Termination benefits
|
|
|
—
|
|
|
|
773
|
|
|
|
|
880
|
|
|
|
2,367
|
|
Cost of inventory used and services provided
|
|
|
907
|
|
|
|
101
|
|
Professional fees
|
|
|
1,380
|
|
|
|
2,287
|
|
Consulting fees
|
|
|
419
|
|
|
|
120
|
|
Insurance
|
|
|
645
|
|
|
|
663
|
|
Third-party research and development
|
|
|
175
|
|
|
|
480
|
|
Travel
|
|
|
51
|
|
|
|
130
|
|
Marketing services
|
|
|
32
|
|
|
|
2
|
|
Laboratory supplies
|
|
|
24
|
|
|
|
32
|
|
Other goods and services
|
|
|
72
|
|
|
|
112
|
|
Leasing costs, net of sublease receipts of $126 (2019 - $58)
|
|
|
104
|
|
|
|
238
|
|
Gain on modification of building lease (notes 6 and 10)
|
|
|
(219
|
)
|
|
|
—
|
|
Impairment of right of use asset (note 6)
|
|
|
—
|
|
|
|
276
|
|
Impairment of prepaid asset
|
|
|
—
|
|
|
|
169
|
|
Depreciation and amortization
|
|
|
13
|
|
|
|
78
|
|
Depreciation of right of use assets (note 6)
|
|
|
165
|
|
|
|
177
|
|
Operating foreign exchange (gain) losses
|
|
|
(60
|
)
|
|
|
44
|
|
|
|
|
5,743
|
|
|
|
8,993
|
|
15.
|
Supplemental
disclosure of cash flow information
|
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
(27
|
)
|
|
|
(85
|
)
|
|
|
(183
|
)
|
|
|
(281
|
)
|
Inventory
|
|
|
4
|
|
|
|
(42
|
)
|
|
|
832
|
|
|
|
(538
|
)
|
Prepaid expenses and other current assets
|
|
|
754
|
|
|
|
(1
|
)
|
|
|
853
|
|
|
|
(124
|
)
|
Payables and accrued liabilities
|
|
|
(761
|
)
|
|
|
(525
|
)
|
|
|
(1,212
|
)
|
|
|
(278
|
)
|
Current portion of deferred revenues
|
|
|
23
|
|
|
|
—
|
|
|
|
(372
|
)
|
|
|
—
|
|
Employee future benefits (note 12)
|
|
|
(123
|
)
|
|
|
(96
|
)
|
|
|
(338
|
)
|
|
|
(313
|
)
|
|
|
|
(130
|
)
|
|
|
(749
|
)
|
|
|
(420
|
)
|
|
|
(1,534
|
)
|
The
Company’s objective in managing capital, consisting of shareholders’ equity, with cash and cash equivalents and restricted
cash being its primary components, is to ensure sufficient liquidity to fund operating expenses and working capital requirements.
Over the past several years, the Company has raised capital via public equity and registered direct offerings and issuances under
various at-the-market sales programs as its primary source of liquidity. The policy on dividends is to retain cash to keep funds
available to finance the activities required to advance the Company’s product development portfolio and to pursue appropriate
commercial opportunities as they may arise. The Company is not subject to any capital requirements imposed by any regulators or
by any other external source.
|
17.
|
Financial
instruments and financial risk management
|
Financial
assets and liabilities as at September 30, 2020 and December 31, 2019 are presented below.
September 30, 2020
|
|
Financial assets at amortized cost
|
|
|
Financial Liabilities at FVTPL
|
|
|
Financial liabilities at amortized cost
|
|
|
Total
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Cash and cash equivalents
|
|
|
21,746
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,746
|
|
Trade and other receivables
|
|
|
254
|
|
|
|
—
|
|
|
|
—
|
|
|
|
254
|
|
Restricted cash equivalents
|
|
|
325
|
|
|
|
—
|
|
|
|
—
|
|
|
|
325
|
|
Payables and accrued liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
936
|
|
|
|
936
|
|
Lease liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
201
|
|
|
|
201
|
|
|
|
|
22,325
|
|
|
|
—
|
|
|
|
1,137
|
|
|
|
21,188
|
|
December 31, 2019
|
|
Financial assets at amortized cost
|
|
|
Financial liabilities at FVTPL
|
|
|
Financial liabilities at amortized cost
|
|
|
Total
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Cash and cash equivalents
|
|
|
7,838
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,838
|
|
Trade and other receivables
|
|
|
404
|
|
|
|
—
|
|
|
|
—
|
|
|
|
404
|
|
Restricted cash equivalents
|
|
|
364
|
|
|
|
—
|
|
|
|
—
|
|
|
|
364
|
|
Payables and accrued liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
2,148
|
|
|
|
2,148
|
|
Lease liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
903
|
|
|
|
903
|
|
Warrant liability
|
|
|
—
|
|
|
|
2,255
|
|
|
|
—
|
|
|
|
2,255
|
|
|
|
|
8,606
|
|
|
|
2,255
|
|
|
|
3,051
|
|
|
|
3,300
|
|
Fair
value
IFRS
13, establishes a hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to
unobservable inputs (Level 3 measurement). The input levels discussed in IFRS 13 are:
Level
1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level
2 – Inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly
(i.e. prices) or indirectly (i.e. derived from prices).
Level
3 – Inputs for an asset or liability that are not based on observable market data (unobservable inputs).
In
notes 11and 13 - The Black-Scholes valuation methodology uses “Level 2” inputs in calculating fair value.
The
carrying values of the Company’s cash and cash equivalents, trade and other receivables, restricted cash equivalents, payables
and accrued liabilities and provision for restructuring and other costs approximate their fair values due to their short-term
maturities or to the prevailing interest rates of the related instruments, which are comparable to those of the market.
Financial
risk factors
The
following provides disclosures relating to the nature and extent of the Company’s exposure to risks arising from financial
instruments, including credit risk, liquidity risk and market risk (share price risk) and how the Company manages those risks.
Credit
risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
As at September 30, 2020, trade accounts receivable for an amount of approximately $61 were with four counterparties of which
$55 was past due and impaired and fully provided for (December 31, 2019 - $265 with four counterparties and $55 past due and impaired
and fully provided for). The licensee is obligated to pay its quarterly royalties, 45 days after quarter-end. At September 30,
2020, the Company has provided for all outstanding and unpaid amounts relating to its operations before its licensing of MacrilenTM
(macimorelin). The licensee has paid all amounts owing within 60 days of invoicing. The maximum exposure to credit risk
approximates the amount outstanding in the Company’s consolidated statement of financial position.
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they become due. As indicated in note
16 - Capital disclosure, the Company manages this risk through the management of its capital structure. It also manages liquidity
risk by continuously monitoring actual and projected cash flows. The Board reviews and approves the Company’s operating
and capital budgets, as well as any material transactions occurring outside of the ordinary course of business. The Company has
adopted an investment policy in respect of the safety and preservation of its capital to ensure the Company’s liquidity
needs are met. The instruments are selected with regard to the expected timing of expenditures and prevailing interest rates.
|
(c)
|
Foreign
exchange risk
|
Entities
using the Euro as their functional currency
The
Company is exposed to foreign exchange risk due to its investments in foreign operations whose functional currency is the Euro.
As at September 30, 2020, if the US dollar had increased or decreased by 10% against the Euro, with all variables held constant,
net income for the nine-month period ended September 30, 2020 would have been lower or higher by approximately $160 (2019 - $710).
The
Company operates in a single operating segment, being the biopharmaceutical segment.
The
following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to
common shareholders.
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Net loss
|
|
(1,136)
|
|
|
(331)
|
|
|
(3,807)
|
|
|
(5,036)
|
|
Basic weighted average number of shares outstanding
|
|
|
56,211,486
|
|
|
|
16,887,819
|
|
|
|
33,832,136
|
|
|
|
16,651,969
|
|
Net loss per share (basic)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.11
|
)
|
|
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares outstanding
|
|
|
56,211,486
|
|
|
|
16,887,819
|
|
|
|
33,832,136
|
|
|
|
16,651,969
|
|
Net loss per share (diluted)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.11
|
)
|
|
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items excluded from the calculation of diluted net loss per share because the exercise price was greater than the average market price of the common shares or due to their anti-dilutive effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
326,410
|
|
|
|
660,021
|
|
|
|
326,410
|
|
|
|
660,021
|
|
Deferred share units
|
|
|
173,000
|
|
|
|
235,000
|
|
|
|
173,000
|
|
|
|
235,000
|
|
Warrants (number of equivalent shares)
|
|
|
47,232,366
|
|
|
|
4,887,810
|
|
|
|
47,232,366
|
|
|
|
6,765,314
|
|
Net
loss per share is calculated by dividing net (loss) income by the weighted average number of shares outstanding during the relevant
period. Diluted weighted average number of shares reflects the dilutive effect of equity instruments, such as any “in the
money” stock options and share purchase warrants. In periods with reported net losses, all stock options and share purchase
warrants are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal, and thus “in
the money” stock options and share purchase warrants have not been included in the computation of net loss per share because
to do so would be anti-dilutive.
20.
|
Commitments
and Contingencies
|
|
|
Service and manufacturing
|
|
|
|
|
$
|
|
Less than 1 year
|
|
|
1,248
|
|
1 - 3 years
|
|
|
5
|
|
4 - 5 years
|
|
|
5
|
|
More than 5 years
|
|
|
1
|
|
Total
|
|
|
1,259
|
|
Contingencies
In
the normal course of operations, the Company may become involved in various claims and legal proceedings related to, for example,
contract terminations and employee-related and other matters.
Securities
class action lawsuit
On
March 9, 2020, the Company settled the previously disclosed class-action lawsuit against it pending in the U.S. District Court
for New Jersey. The settlement payment of $6,500 will be funded entirely by the Company’s insurers. The class-action lawsuit
alleged that the Company and certain of its former officers and directors violated the Securities Exchange Act of 1934 in connection
with certain public statements between August 30, 2011 and November 6, 2014, regarding the safety and efficacy of Macrilen™
(macimorelin) and the prospects for the approval of the Company’s New Drug Application (“NDA”) for the product
by the FDA. This settlement remains subject to execution of final settlement documents and approval by the U.S. District Court
for the District of New Jersey.
Exhibit
99.2
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Introduction
This
Management’s Discussion and Analysis (“MD&A”) provides a review of the financial condition as of September
30, 2020, and the results of operations and cash flows for the three- and nine- months ended September 30, 2020 and 2019 of Aeterna
Zentaris Inc. In this MD&A, “Aeterna Zentaris”, the “Company”, “we”, “us”
and “our” mean Aeterna Zentaris Inc. and its subsidiaries. This discussion should be read in conjunction with the
information contained in the Company’s unaudited condensed consolidated financial statements and the accompanying notes
thereto as at September 30, 2020 and for the three- and nine- months ended September 30, 2020 and 2019 and the audited consolidated
financial statements and MD&A for the years ended December 31, 2019 and 2018, which were prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The Company’s common shares are listed on both The NASDAQ Capital Market (“NASDAQ”) and on the Toronto Stock
Exchange (“TSX”) under the symbol “AEZS”.
All
amounts in this MD&A are presented in U.S. dollars, except for share, option and share purchase warrant data, or as otherwise
noted.
This
MD&A was approved by the Company’s Board of Directors (the “Board”) on November 5, 2020. This MD&A is
dated November 5, 2020.
Company
Overview
Aeterna
Zentaris is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company’s
lead product, Macrilen™ (macimorelin), is the first and only United States Food and Drug Administration (“FDA”)
and European Commission approved oral test indicated for the diagnosis of patients with adult growth hormone deficiency (“AGHD”).
Macrilen™ (macimorelin) is currently marketed in the United States through a license and assignment agreement (the “License
Agreement”) with Novo Nordisk A/S (“Novo”). Aeterna Zentaris is also pursuing the development of macimorelin
for the diagnosis of child-onset growth hormone deficiency (“CGHD”), an area of significant unmet need. In addition,
we are actively pursuing business development opportunities for the commercialization of macimorelin in Europe and the rest of
the world in addition to other non-strategic assets to monetize their value. Aeterna Zentaris intends to balance risks and secure
growth opportunities by re-establishing a diversified, yet focused, development pipeline to which the Company can best leverage
its expertise and experience. The Company is focused on opportunistically utilizing its network with universities in Europe and
the US which provides, what the Company believes will be, vital access to innovative development candidates in different indications,
with a focus on rare or orphan indications and potential for pediatric use.
About
Forward-Looking Statements
This
document contains forward-looking statements (as defined by applicable securities legislation) made pursuant to the safe-harbor
provision of the U.S. Private Securities Litigation Reform Act of 1995, which reflect our current expectations regarding future
events. Forward-looking statements may include, but are not limited to statements preceded by, followed by, or that include the
words “will,” “expects,” “believes,” “intends,” “would,” “could,”
“may,” “anticipates,” and similar terms that relate to future events, performance, or our results. Forward-looking
statements involve known and unknown risks and uncertainties, including those discussed in this management’s discussion
and analysis and in our Annual Report on Form 20-F, under the caption “Key Information - Risk Factors” filed with
the relevant Canadian securities regulatory authorities in lieu of an annual information form and with the U.S. Securities and
Exchange Commission. Known and unknown risks and uncertainties could cause our actual results to differ materially from those
in forward-looking statements. Such risks and uncertainties include, among others, our ability to raise capital, our ability to
continue to list our common shares on the NASDAQ, our ability to continue as a going concern is dependent, in part, on our ability
to transfer cash between Aeterna Zentaris GmbH (“AEZS Germany”) to Aeterna Zentaris and our U.S. subsidiary to meet
our commitments, our now heavy dependence on the success of Macrilen™ (macimorelin) and related out-licensing arrangements
and the continued availability of funds and resources to successfully commercialize the product, including our heavy reliance
on the success of the License Agreement with Novo, our ability to enter into out-licensing, development, manufacturing, marketing
and distribution agreements with other pharmaceutical companies and keep such agreements in effect, our reliance on third parties
for the manufacturing and commercialization of Macrilen™ (macimorelin), potential disputes with third parties leading to
delays in or termination of the manufacturing, development, out-licensing or commercialization of our product candidates, or resulting
in significant litigation or arbitration, uncertainties related to the regulatory process, unforeseen global instability, including
the instability due to the global pandemic of the novel coronavirus or COVID-19, our ability to efficiently commercialize or out-license
Macrilen™ (macimorelin), our reliance on the success of the pediatric clinical trial in the European Union (“E.U.
“) and U.S. for Macrilen™ (macimorelin), the degree of market acceptance of Macrilen™ (macimorelin), our ability
to obtain necessary approvals from the relevant regulatory authorities to enable us to use the desired brand names for our product,
our ability to successfully negotiate pricing and reimbursement in key markets in the E.U. for Macrilen™ (macimorelin),
any evaluation of potential strategic alternatives to maximize potential future growth and shareholder value may not result in
any such alternative being pursued, and even if pursued, may not result in the anticipated benefits, our ability to take advantage
of business opportunities in the pharmaceutical industry, our ability to protect our intellectual property, and the potential
of liability arising from shareholder lawsuits and general changes in economic conditions. Investors should consult our quarterly
and annual filings with the Canadian and U.S. securities regulatory authorities for additional information on risks and uncertainties.
Given these uncertainties and risk factors, readers are cautioned not to place undue reliance on these forward-looking statements.
We disclaim any obligation to update any such factors or to publicly announce any revisions to any of the forward-looking statements
contained herein to reflect future results, events or developments, unless required to do so by a governmental authority or applicable
law.
About
Material Information
This
MD&A includes information that we believe to be material to investors after considering all circumstances. We consider information
and disclosures to be material if they result in, or would reasonably be expected to result in, a significant change in the market
price or value of our securities, or where it is likely that a reasonable investor would consider the information and disclosures
to be important in making an investment decision.
We
are a reporting issuer under the securities legislation of all of the provinces of Canada, and our securities are registered with
the SEC. We are therefore required to file or furnish continuous disclosure information, such as interim and annual financial
statements, MD&A, proxy or information circulars, annual reports on Form 20-F, material change reports and press releases
with the appropriate securities regulatory authorities. Copies of these documents may be obtained free of charge upon request
from our Corporate Secretary or on the Internet at the following addresses: www.zentaris.com, www.sedar.com and www.sec.gov.
Key
Developments
Financing
activities
On
February 21, 2020, the Company closed a registered direct offering for 3,478,261 common shares, at a purchase price of $1.29375
per share, priced at-the-market. Additionally, the Company issued to the investors in the offering unregistered warrants to purchase
up to an aggregate of 2,608,696 common shares in a concurrent private placement. The warrants have an exercise price of $1.20
per common share, are exercisable immediately and will expire five and one-half years following the date of issuance. The net
cash proceeds to the Company from the offering totaled $3.9 million. The Company issued 243,478 warrants to the placement agent
with an exercise price of $1.61719 per common share, which are exercisable immediately and will expire five years following the
date of issuance. Collectively, this financing is referred to as the “ February 2020 Financing”.
Effective
June 16, 2020, the Company registered under the Securities Act of 1933 the 2,608,696 investor warrants and 243,478 placement agent
warrants issued on February 21, 2020 and the 3,325,000 investor warrants issued on September 20, 2019.
On
July 7, 2020, the Company closed a public offering of 26,666,666 units at a price to the public of $0.45 per unit, for gross proceeds
of $12 million, before deducting placement agent fees and other offering expenses payable by the Company, in the amount of $1.4
million. Each unit contained one common share (or common share equivalent in lieu thereof) and one investor share purchase warrant
to purchase one common share. In total, 26,666,666 common shares, 26,666,666 investor share purchase warrants with an exercise
price of $0.45 per share expiring July 7, 2025 and 1,866,667 placement agent warrants with an exercise price of $0.5625 per share
expiring July 1, 2025 were issued. The net cash proceeds to the Company from the offering totaled $10.6 million. Collectively,
this financing is referred to as the “July 2020 Financing”.
On
August 5, 2020, the Company closed a securities purchase agreement with several institutional investors in the United States providing
for the sale and issuance of 12,427,876 common shares at a purchase price of $0.56325 per common share in a registered direct
offering priced at-the-market under NASDAQ rules. The offering resulted in gross proceeds of $7 million. Concurrently, the Company
issued to the purchasers unregistered warrants to purchase up to an aggregate of 9,320,907 common shares. The warrants are exercisable
for a period of five and one-half years, exercisable immediately following the issuance date and have an exercise price of $0.47
per common share. In addition, the Company issued unregistered warrants to the placement agent to purchase up to an aggregate
of 869,952 common shares, with an exercise price of $0.7040625 per share and an expiration date of August 3, 2025. The net cash
proceeds to the Company from the offering totaled $6.3 million. Effective September 14, 2020, the Company registered the common
shares underlying the 9,320,907 investor warrants and 869,952 placement agent warrants issued on August 3, 2020 by way of a registration
statement which removed the cashless exercise option for registered warrants. Collectively, this financing is referred to as the
“August 2020 Financing”.
Commercialization
of Macrilen™ (macimorelin) in U.S. and Canada
On
January 16, 2018, the Company entered into the License Agreement which provides (i) for the “right to use” license
relating to the adult indication, (ii) for the right to acquire a license for the pediatric indication if and when the FDA approves
a pediatric indication, (iii) that Novo, as the licensee ,is to fund 70% of the costs of a pediatric clinical trial submitted
for approval to the European Medicines Agency (“EMA”) under the agreed Pediatric Investigation Plan (the “PIP”)
studies to be run by the Company with customary oversight from a joint steering committee (the “JSC”) and (iv) an
interim supply arrangement (the “Supply Arrangement”). Strongbridge Ireland Limited, effective December 19, 2018,
sold the U.S. and Canadian rights to Macrilen™ (macimorelin) to Novo for a payment plus tiered royalties on net sales.
Following
Novo’s acquisition of the U.S. and Canadian rights to Macrilen™ (macimorelin), the JSC has met regularly to discuss
Novo’s commercialization plan for the U.S. and Canada, their supply chain needs and the enrollment of patients and protocols
of the two PIP studies. The Company expects that quarterly meetings will continue as forecasts for sales, inventory build and
needs for the PIP studies progress.
Royalty
income earned under the License Agreement for the nine-month period ending September 30, 2020 was $0.05 million (2019 - $0.03
million) and, during the nine-month period ended September 30, 2020, the Company invoiced Novo $0.03 million for its share of
PIP study costs (2019 - $0.8 million).
The
Company agreed, in the Supply Arrangement to the License Agreement, to supply ingredients for the manufacture of Macrilen™
(macimorelin) during an interim period at a price that is set ‘at cost’ without any profit margin. In November 2019,
Novo contracted AEZS Germany, to provide supply chain services including Active Pharmaceutical Ingredients (“API”)
batch production and delivery of certain API and semi-finished goods, as well as the provision of ongoing support activities.
During the nine-month period ended September 30, 2020, the Company invoiced Novo $0.15 million for supply chain activities (2019
- $0.97 million) and invoiced $1.02 million in product sales (2019 - $0.13 million).
Pediatric
clinical trial for Macrilen™ (macimorelin)
On
January 28, 2020, we announced the successful completion of patient recruitment for the first pediatric study of macimorelin as
a growth hormone stimulation test for the evaluation of growth hormone deficiency (“GHD”) in children. This study,
AEZS-130-P01 (“Study P01”), was the first of two studies as agreed with the EMA in our PIP for macimorelin as a GHD
diagnostic. Macimorelin, a ghrelin agonist, is an orally active small molecule that stimulates the secretion of growth hormone
from the pituitary gland into the circulatory system. The goal of Study P01 was to establish a dose that can both be safely administered
to pediatric patients and cause a clear rise in growth hormone concentration in subjects ultimately diagnosed as not having GHD.
The recommended dose derived from Study P01 will be evaluated in the pivotal second study, AEZS-130-P02 (“Study P02”),
on diagnostic efficacy and safety. Study P01 was an international, multicenter study which was conducted in Hungary, Poland, Ukraine,
Serbia, Belarus and Russia. Study P01 was an open label, group comparison, dose escalation trial designed to investigate the safety,
tolerability, and pharmacokinetic/pharmacodynamic (“PK/PD”) of macimorelin acetate after ascending single oral doses
of macimorelin at 0.25, 0.5, and 1.0 mg per kg body weight in pediatric patients from two to less than 18 years of age with suspected.
We enrolled a total of 24 pediatric patients across the three cohorts of the study. Per study protocol, all enrolled patients
completed four study visits after successful completion of the screening period. At Visit 1 and Visit 3, a provocative growth
hormone stimulation test was conducted according to the study sites’ local practices. At Visit 2, the macimorelin test was
performed and following the oral administration of the macimorelin solution, blood samples were taken at predefined times for
PK/PD assessment. Visit 4 was a safety follow-up visit at study end.
The
final study results from Study P01 were published in the second quarter of 2020 indicating positive safety and tolerability data
for use of macimorelin in child-onset growth hormone deficiency as well as PK/PD data observed in a range as expected from the
adult studies. Thereafter, we plan to proceed with the pivotal Study P02 with an expected start date in the first quarter of 2021
and an expected completion date in July 2022, according to the PIP agreement with the EMA. Study P02 is designed to investigate
the diagnostic efficacy and safety of macimorelin acetate in a dose of 1.0 mg/kg body weight in pediatric patients from two to
less than 18 years of age with suspected.
On
April 7, 2020 we announced the decision of the EMA to accept our modification request of our PIP as originally approved in March
2017, which covered the conduct of two pediatric studies and defined relevant key elements in the outline of these studies. We
believe this EMA decision supports the development of one globally harmonized study protocol for test validation, specifically
Study P02, which we expect to be accepted both in Europe and the U.S.
Megapharm
Distribution Agreement
On
June 25, 2020, we announced that we entered into an exclusive distribution and related quality agreement with Megapharm Ltd. (“Megapharm”),
a leading Israel-based biopharmaceutical company, for the commercialization in Israel and in the Palestinian Authority of macimorelin,
to be used in the diagnosis of patients with AGHD and in clinical development for the diagnosis of CGHD.
Under
the terms of the agreement, Megapharm will be responsible for obtaining registration to market macimorelin in Israel and the Palestinian
Authority, while we will be responsible for manufacturing, product supply, quality assurance and control, regulatory support,
and maintenance of the relevant intellectual property. The regulatory process for macimorelin in Israel is expected to be completed
in the second half of 2021.
Nasdaq
Letters
On
July 27, 2020, we received a letter from the Listing Qualifications Staff of the NASDAQ (the “Staff”), notifying us
that for the last 30 consecutive business days prior to the date of the letter, the closing bid price of our common shares was
below $1.00 per share and, therefore, we did not meet the requirement for continued listing on the NASDAQ as required by Nasdaq
Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been
provided a grace period of 180 calendar days, through January 25, 2021, to evidence compliance with the Bid Price Rule. To evidence
compliance, we must evidence a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days on
or before January 25, 2021. In the event we do not timely evidence compliance with the Bid Price Rule, we may be eligible for
an additional 180 calendar day grace period or may face delisting. In the latter case, we would be entitled to request a hearing
before the Nasdaq Hearings Panel, which request would stay any delisting action by the Staff pending completion of the hearing
process. NASDAQ’s notice has no immediate effect on the listing of our common shares on the NASDAQ and does not otherwise
impact our listing on the TSX. We are considering the options available to us to evidence compliance with the Bid Price Rule prior
to the expiration of the grace period.
In
addition to the minimum bid price requirement, the continued listing rules of the NASDAQ require us to meet at least one of the
following listing standards: (i) stockholders’ equity of at least $2.5 million, (ii) market value of listed securities (calculated
by multiplying the daily closing bid price of our securities by our total outstanding securities) of at least $35 million or (iii)
net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years) of at least $500,000
(collectively, the “Additional Listing Standards”).
On
April 8, 2020, we received a letter from the Staff notifying us that, based upon the net loss for the fiscal year ended December
31, 2019, the Company no longer satisfies the minimum net income requirement for continued listing on the NASDAQ under Nasdaq
Listing Rule 5550(b)(3) and does not otherwise satisfy the alternative requirements of market value of listed securities or stockholders’
equity. The Company timely submitted a plan to regain compliance with Nasdaq Listing Rule 5550(b)(3), and on June 3, 2020 the
Staff granted the Company an extension of 180 calendar days, through October 5, 2020, to evidence compliance with this requirement.
On July 1, 2020, we priced an approximate $12 million public offering of our common shares and warrants, pursuant to which we
ultimately raised approximately $10.5 million in net proceeds. As a result of the offering, on July 30, 2020, we received a letter
from the Staff notifying us that the Staff determined that we comply with the stockholders’ equity component of the rules,
subject to being delisted if in a future periodic report we fail to evidence compliance. There is no assurance that we will maintain
compliance, and therefore there can be no assurance that our common shares will remain listed on the NASDAQ.
Changes
in personnel
On
December 16, 2019, the Company announced changes to its director composition planned for the first quarter of 2020. Mr. Gilles
Gagnon (M.Sc., MBA, ICD.D) joined the Board on January 1, 2020 and replaced Robin Hoke Smith on the Nominating, Governance and
Compensation Committee effective May 15, 2020. Mr. Gérard Limoges, who had served on the Board since 2004, retired from
the Board on March 31, 2020, and was replaced by Mr. Pierre-Yves Desbiens (CPA, CA, MBA), who also replaced Mr. Limoges as Chair
of the Audit Committee. On May 15, 2020, Mr. Peter Edwards (J.D.) joined the Board and replaced Dr. Brent Norton on the Audit
Committee and on the Nominating, Governance and Compensation Committee
Settlement
of class-action lawsuit
On
March 9, 2020, the Company settled the previously disclosed class-action lawsuit against it pending in the U.S. District Court
for the District of New Jersey. The settlement payment of $6.5 million will be funded entirely by our insurers. The class-action
lawsuit alleged that the Company and certain of its former officers and directors violated the Securities Exchange Act of 1934
in connection with certain public statements between August 30, 2011 and November 6, 2014, regarding the safety and efficacy of
Macrilen™ (macimorelin) and the prospects for the approval of the Company’s New Drug Application (“NDA”)
for the product by the FDA. This settlement remains subject to execution of final settlement documents and approval by the U.S.
District Court for the District of New Jersey.
Renegotiation
of German building lease
Effective
March 31, 2020, the Company and its landlord mutually agreed to modify its existing building lease agreement for its German subsidiary
for 30,343 square feet for management, R&D, business development and administration whereby 9,882 square feet was retained
for business development, clinical development, manufacturing, supply chain and management purposes, extended the lease term for
its portion of the reduced space from April 30, 2021 to March 31, 2022 and, retained one sub-lessee until April 30, 2021. On May
5, 2020, the sub-lessee terminated its lease with the Company effective April 30, 2020 and signed a lease directly with the landlord.
AEZS Germany’s revised square footage is 6,835 for business development, clinical development, manufacturing, supply chain
and management purposes.
Exposure
to epidemic or pandemic outbreak
As
of November 5, 2020, coronavirus or COVID-19, a contagious disease that was characterized by the World Health Organization as
a pandemic in early 2020, continues to affect the global community and is also adversely affecting our business operations. Given
this rapidly evolving situation, the duration, scope and impact on our business operations, clinical studies and financial results
cannot at this time be fully determined or quantified. Aeterna Zentaris has developed protocols and procedures should they be
required to deal with any potential epidemics and pandemics and has implemented these protocols and procedures in place to address
the current COVID-19 pandemic. Despite appropriate steps being taken to mitigate such risks, there can be no assurance that existing
policies and procedures will ensure that the Company’s operations will not be further adversely affected.
The
COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets of
many regions and countries. While the COVID-19 outbreak may still be in its early stages, international stock markets have begun
to reflect the uncertainty associated with the potential economic impact of the outbreak and the significant declines and increased
volatility in the TSX Composite Index, the NASDAQ and other major stock market indices around the world in the latter part of
February and in March 2020 has largely been attributed to the effects of COVID-19. There can be no assurance that a disruption
in financial markets, regional economies and the world economy would not negatively affect Aeterna Zentaris’ access to capital
or the financial performance of the Company.
Uncertain
factors, including the duration of the outbreak, the severity of the disease and the actions to contain or treat its impact, could
impair our operations including, among other things, employee mobility and productivity, availability of our facilities, conduct
of our clinical trials and the availability and the productivity of third party product and service suppliers. Please see the
Risk Factor entitled “The economic effects of a pandemic, epidemic or outbreak of an infectious disease could adversely
affect our operations or the market price of our Common Shares” in our Annual Report on Form 20-F for the year ended December
31, 2019.
Monetization
of non-strategic assets
Opportunities
for the Company to monetize non-strategic assets include preclinical work done on AEZS-120, a prostate cancer vaccine and preclinical
and clinical work done on AEZS-104 (perifosine) and our small molecule kinase inhibitor program.
Condensed
Consolidated Statements of Comprehensive (Loss) Income Data
(in
thousands, except share and per share data)
|
|
Three
months ended
|
|
|
Nine
months ended
|
|
|
|
September
30
|
|
|
September
30
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
|
|
23
|
|
|
|
8
|
|
|
|
47
|
|
|
|
29
|
|
Product
sales
|
|
|
—
|
|
|
|
—
|
|
|
|
1,016
|
|
|
|
129
|
|
Supply
chain
|
|
|
87
|
|
|
|
256
|
|
|
|
168
|
|
|
|
301
|
|
Licensing
revenue
|
|
|
18
|
|
|
|
19
|
|
|
|
55
|
|
|
|
55
|
|
Total
revenues
|
|
|
128
|
|
|
|
283
|
|
|
|
1,286
|
|
|
|
514
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
33
|
|
|
|
—
|
|
|
|
907
|
|
|
|
101
|
|
Research
and development costs
|
|
|
372
|
|
|
|
475
|
|
|
|
880
|
|
|
|
1,574
|
|
General
and administrative expenses
|
|
|
1,180
|
|
|
|
1,364
|
|
|
|
3,445
|
|
|
|
4,924
|
|
Selling
expenses
|
|
|
283
|
|
|
|
377
|
|
|
|
730
|
|
|
|
1,176
|
|
Restructuring
costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
773
|
|
Impairment
of right of use asset
|
|
|
—
|
|
|
|
(125
|
)
|
|
|
—
|
|
|
|
276
|
|
Gain
on modification of building lease
|
|
|
—
|
|
|
|
—
|
|
|
|
219
|
|
|
|
—
|
|
Impairment
of prepaid asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
169
|
|
Total
operating expenses
|
|
|
1,868
|
|
|
|
2,091
|
|
|
|
5,743
|
|
|
|
8,993
|
|
Loss
from operations
|
|
|
(1,740
|
)
|
|
|
(1,808
|
)
|
|
|
(4,457
|
)
|
|
|
(8,479
|
)
|
Gain
(loss) due to changes in foreign currency exchange rates
|
|
|
211
|
|
|
|
3
|
|
|
|
237
|
|
|
|
61
|
|
(Loss)
gain on change in fair value of warrant liability
|
|
|
816
|
|
|
|
2,120
|
|
|
|
1,147
|
|
|
|
3,985
|
|
Other
finance (costs) income
|
|
|
(423
|
)
|
|
|
(646
|
)
|
|
|
(734
|
)
|
|
|
(603
|
)
|
Net
finance income (costs)
|
|
|
604
|
|
|
|
1,477
|
|
|
|
650
|
|
|
|
3,443
|
|
Net
(loss) income
|
|
|
(1,136
|
)
|
|
|
(331
|
)
|
|
|
(3,807
|
)
|
|
|
(5,036
|
)
|
Other
comprehensive (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items
that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
(483
|
)
|
|
|
377
|
|
|
|
(482
|
)
|
|
|
351
|
|
Items
that will not be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial
(loss) on defined benefit plans
|
|
|
(635
|
)
|
|
|
(536
|
)
|
|
|
(665
|
)
|
|
|
(2,027
|
)
|
Comprehensive
(loss)
|
|
|
(2,554
|
)
|
|
|
(490
|
)
|
|
|
(4,954
|
)
|
|
|
(6,712
|
)
|
Net
(loss) income per share [basic and diluted]
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
(0.11
|
)
|
|
|
(0.31
|
)
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
56,211,486
|
|
|
|
16,887,819
|
|
|
|
33,832,136
|
|
|
|
16,651,969
|
|
Diluted
|
|
|
56,211,486
|
|
|
|
16,887,819
|
|
|
|
33,832,136
|
|
|
|
16,651,969
|
|
Condensed
Consolidated Interim Statements of Financial Position Data
(in
thousands)
|
|
As
at September 30, 2020
|
|
|
As
at December 31, 2019
|
|
|
|
$
|
|
|
$
|
|
Cash
and cash equivalents
|
|
|
21,746
|
|
|
|
7,838
|
|
Trade
and other receivables and other current assets
|
|
|
1,199
|
|
|
|
1,869
|
|
Inventory
|
|
|
371
|
|
|
|
1,203
|
|
Restricted
cash equivalents
|
|
|
325
|
|
|
|
364
|
|
Property,
plant and equipment
|
|
|
25
|
|
|
|
35
|
|
Right
of use assets
|
|
|
171
|
|
|
|
582
|
|
Other
non-current assets
|
|
|
8,434
|
|
|
|
8,090
|
|
Total
assets
|
|
|
32,271
|
|
|
|
19,981
|
|
Payables
and accrued liabilities and income taxes payable
|
|
|
936
|
|
|
|
3,596
|
|
Current
portion of provision for restructuring and other costs
|
|
|
117
|
|
|
|
418
|
|
Current
portion of deferred revenues
|
|
|
619
|
|
|
|
991
|
|
Lease
liabilities
|
|
|
201
|
|
|
|
903
|
|
Warrant
liability
|
|
|
—
|
|
|
|
2,255
|
|
Non-financial
non-current liabilities (1)
|
|
|
15,250
|
|
|
|
14,281
|
|
Total
liabilities
|
|
|
17,123
|
|
|
|
22,444
|
|
Shareholders’
equity (deficiency)
|
|
|
15,148
|
|
|
|
(2,463
|
)
|
Total
liabilities and shareholders’ equity (deficiency)
|
|
|
32,271
|
|
|
|
19,981
|
|
(1)
|
Comprised
mainly of employee future benefits, provisions for restructuring and other costs and
non-current portion of deferred revenues.
|
Basis
of presentation
The
accounting policies in the Company’s unaudited interim condensed consolidated financial statements are consistent with those
presented in the Company’s annual consolidated financial statements except as noted below:
Share
purchase warrants
The
Company accounts for share purchase warrants that meet the fixed-for-fixed criteria as equity-settled. Such share purchase warrants
are accounted for by using the relative fair value method whereby the total gross proceeds of the financing are allocated to each
of the common shares and the share purchase warrants based on their relative fair values.
Deferred
share units
Deferred
share units (“DSUs”) are classified as other capital. The Company grants DSUs to members of its Board who are not
employees or officers of the Company. DSUs cannot be redeemed until the holder is no longer a director of the Company and are
considered equity-settled instruments. Under the terms of the DSU agreement, the DSUs vest immediately upon grant. The value attributable
to the DSUs is based on the market value of the share price at the time of grant and share based compensation expense is recognized
in general and administrative expenses on the consolidated statements of loss and comprehensive (loss) income. At the time of
redemption, each DSU may be exchanged for one common share of the Company.
Any
consideration received by the Company in connection with the exercise of DSUs is credited to share capital. Any other capital
component of the share-based compensation is transferred to share capital upon the issuance of shares.
Critical
accounting policies, estimates and judgments
The
preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and
related disclosures. Judgments, estimates and assumptions are based on historical experience, expectations, current trends and
other factors that management believes to be relevant at the time at which the Company’s condensed interim consolidated
financial statements are prepared.
Management
reviews, on a regular basis, the Company’s accounting policies, assumptions, estimates and judgments in order to ensure
that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Measurement
uncertainty:
The
significant spread of COVID-19 within the U.S., Canada, Germany and elsewhere has resulted in a widespread health crisis and has
had adverse effects on local, national and global economies generally, the markets the Company serves, its operations and the
market price of its common shares.
Uncertain
factors, including the duration of the outbreak, the severity of the disease and the actions to contain or treat its impact, could
cause interruptions in the Company’s operations and supply chain, which could impact the Company’s ability to accurately
measure the net realizable value of inventory and fair value of trade and other receivables.
Critical
accounting estimates and assumptions, as well as critical judgments used in applying accounting policies in the preparation of
our interim condensed consolidated financial statements were the same as those applied to our annual consolidated financial statements
as of December 31, 2019 and December 31, 2018 and for the years ended December 31, 2019, 2018 and 2017.
Impact
of adoption of new IFRS standards in 2020
(a)
|
IAS
1 Presentation of financial statements and IAS 8 Accounting policies, changes in accounting
estimates and errors (amendment)
|
The
amendments to IAS 1 and IAS 8 clarify the definition of material and seek to align the definition used in the Conceptual Framework
with that in the standards themselves as well as ensuring the definition of material is consistent across all IFRS. The Company
adopted these amendments effective January 1, 2020. The adoption of these amendments did not have a significant impact on the
Company’s condensed interim consolidated financial statements.
(b)
|
Conceptual
framework for financial reporting
|
Together
with the revised Conceptual Framework published in March 2018, the IASB also issued Amendments to References to the Conceptual
Framework in IFRS Standards. The Company adopted the Revised Conceptual Framework effective January 1, 2020. The adoption of these
amendments did not have a significant impact on the Company’s condensed interim consolidated financial statements.
IFRS
Pronouncements issued but not yet effective
(c)
|
IAS
1 – Presentation of financial statements
|
The
amendment to IAS 1 clarifies how to classify debt and other liabilities as either current or non-current. The amendment will be
effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the new guidance and impacts
on its consolidated financial statements.
(d)
|
Annual
improvements to IFRS standards 2018-2020
|
The
annual improvements process addresses issues in the 2018-2020 reporting cycles including changes to IFRS 9, Financial Instruments,
IFRS 1, First Time adoption of IFRS, IFRS 16, Leases, and IAS 41, Biological Assets.
i)
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities.
ii)
The amendment to IFRS 1 allows a subsidiary adopting IFRS at a later date than its parent to also measure cumulative translation
differences using the amounts reported by the parent based on the parent’s date of transition to IFRS.
iii)
The amendment to IFRS 16’s illustrative example 13 removes the illustration of payments from the lessor related to leasehold
improvements.
These
amendments will be effective for annual periods beginning on or after January 1, 2022. The Company is currently evaluating the
new guidance and impacts on its consolidated financial statements.
(e)
IAS 37 - Onerous contracts - Cost of fulfilling a contract
The
amendment to IAS 37 clarifies the meaning of costs to fulfil a contract and that before a separate provision for an onerous contract
is established, an entity recognizes any impairment loss that has occurred on assets used in fulfilling the contract, rather than
on assets dedicated to the contract. This amendment will be effective for annual periods beginning on or after January 1, 2022.
The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
(f)
IAS 16 - Proceeds before intended use
The
amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds
received from selling items produced while the entity is preparing the assets for its intended use (for example, the proceeds
from selling samples produced when testing a machine to see if it is functioning properly). It also clarifies that an entity is
testing whether the asset is functioning properly when it assesses the technical and physical performance of the asset. The amendment
also requires certain related disclosures. This amendment will be effective for annual periods beginning on or after January 1,
2022. The Company is currently evaluating the new guidance and impacts on its consolidated financial statements.
Financial
Risk Factors and Other Instruments
The
nature and extent of our exposure to risks arising from financial instruments, including credit risk, liquidity risk and market
risk (share price risk) and how we manage those risks are described in note 24 to the Company’s annual audited consolidated
financial statements as at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017.
Results
of operations for the three-month period ended September 30, 2020
For
the three-month period ended September 30, 2020, we reported a consolidated net loss of $1.1 million, or $0.02 loss per common
share (basic), as compared with a consolidated net loss of $0.3 million, or $0.02 loss per common share for the three-month period
ended September 30, 2019. The $0.8 million decline in net results is primarily from a change in fair value of warrant liability
of $1.3 million partially offset by a reduction of $0.2 million in operating expenses.
Revenues
Our
total revenue for the three-month period ended September 30, 2020 was $0.1 million as compared with $0.3 million for the same
period in 2019, representing adecrease of $0.2 million. The 2020 revenue was comprised of $0.01 million in royalty revenue (2019
- nil), $0.09 million in supply chain revenue (2019 - $0.3 million) and $0.01 million in licensing revenue (2019 – $0.02
million).
Operating
expenses
Our
total operating expense for the three-month period ended September 30, 2020 was $1.9 million as compared with $2.1 million for
the same period in 2019, representing a decrease of $0.2 million. This decrease arises primarily from a $0.2 million decline in
general and administrative expenses, a $0.1 million decline in research and development costs, and a $0.1 million decline in selling
expenses. The impact of our June 2019 restructuring in our German subsidiary, namely for payroll and share based compensation
costs, was a key influence in the declines in general and administrative expenses, selling and research and development expenses.
The further impact on the decline in research and development costs is attributed to the different phases of activity of Study
P01. During 2019, study activities included study start with document development, medication manufacturing, study feasibility
testing at different sites and clinical trial applications in Hungary, Poland, Belarus, Russia, Ukraine and Serbia, while in 2020,
all sites had completed their enrollment and clinical activities.
Net
finance income
Our
net finance income for the three-month period ended September 30, 2020 was $0.6 million as compared with a net finance income
of $1.5 million for the same period in 2019, representing a decrease of $0.9 million. This is primarily due to a $1.3 million
lower gain in the change in fair value of warrant liability offset by $0.2 million from changes in currency exchange rates and
$0.2 million from other finance costs. Effective September 14, 2020, the Company registered the common shares underlying the 9,320,907
investor warrants and 869,952 placement agent warrants issued on August 3, 2020 by way of a registration statement which removed
the cashless exercise option for registered warrants.
Results
of operations for the nine-month period ended September 30, 2020
For
the nine-month period ended September 30, 2020, we reported a consolidated net loss of $3.8 million, or $0.11 loss per common
share, as compared with a consolidated net loss of $5.0 million, or $0.31 loss per common share (basic), for the nine-month period
ended September 30, 2019. The $1.2 million improvement in net results is primarily from an increase in total revenues of $0.8
million and a reduction of operating expenses of $3.3 million partially offset by a $2.8 million decline in net finance income.
Revenues
Our
total revenue for the nine-month period ended September 30, 2020 was $1.3 million as compared with $0.5 million for the same period
in 2019, representing an increase of $0.8 million. The 2020 revenue was comprised of $0.05 million in royalty income (2019 - $0.03
million), $1.0 million in product sales (2019 – $0.1 million), $0.2 million in supply chain (2019 - $0.3 million) and $0.06
million in licensing revenue (2019 - $0.06 million). The product sales in 2020 represented sales of Macrilen™ (macimorelin)
to Novo.
Operating
expenses
Our
total operating expense for the nine-month period ended September 30, 2020 was $5.7 million as compared with $9.0 million for
the same period in 2019, representing a decrease of $3.3 million. This decline arises primarily from a $1.5 million reduction
in general and administration expenses, a decrease of $0.8 million in restructuring costs, a $0.7 million reduction in research
and development costs, a reduction of $0.3 million in impairment of right to use assets, $0.4 million reduction in selling costs,
a $0.2 million gain in modification of building lease and $0.2 million impairment of prepaid asset, offset by an increase of $0.8
million in cost of sales. This decline in operating expenses is in-line with the expected impact of our cost control initiatives
as previously implemented and the impact of the 2019 restructuring at our German subsidiary.
Net
finance income
Our
net finance income for the nine-month period ended September 30, 2020 was $0.7 million as compared with $3.4 million for the same
period in 2019, representing a decrease of $2.7 million. This is primarily due to a $2.8 million change in fair value of warrant
liability, an increase of $0.1 million in other finance costs and a $0.2 million increase in gain due to foreign currency exchange
rates. Effective June 16, 2020, the Company registered the common shares underlying the 2,608,696 investor warrants and 243,478
placement agent warrants issued on February 21, 2020 and the 3,325,000 investor warrants issued on September 20, 2019 by way of
a registration statement which removed the cashless exercise option for registered warrants. Effective September 14, 2020, the
Company registered the common shares underlying the 9,320,907 investor warrants and 869,952 placement agent warrants issued on
August 3, 2020 by way of a registration statement which removed the cashless exercise option for registered warrants.
Selected
quarterly financial data
|
|
Three
months ended
|
|
(in
thousands, except for per share data)
|
|
September
30, 2020
|
|
|
June
30, 2020
|
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Revenues
|
|
|
128
|
|
|
|
68
|
|
|
|
1,090
|
|
|
|
18
|
|
Net
(loss) income
|
|
|
(1,136
|
)
|
|
|
(3,450
|
)
|
|
|
779
|
|
|
|
(1,006
|
)
|
Net
(loss) income per share [basic and diluted]*
|
|
|
(0.02
|
)
|
|
|
(0.15
|
)
|
|
|
0.04
|
|
|
|
(0.05
|
)
|
|
|
Three
months ended
|
|
(in
thousands, except for per share data)
|
|
September
30, 2019
|
|
|
June
30, 2019
|
|
|
March
31, 2019
|
|
|
December
31, 2018
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Revenues
|
|
|
283
|
|
|
|
194
|
|
|
|
37
|
|
|
|
1,392
|
|
Net
(loss) income
|
|
|
(331
|
)
|
|
|
206
|
|
|
|
(4,911
|
)
|
|
|
(5,126
|
)
|
Net
(loss) income per share [basic and diluted]*
|
|
|
(0.02
|
)
|
|
|
0.01
|
|
|
|
(0.30
|
)
|
|
|
(0.31
|
)
|
*
|
Net
loss per share is based on the weighted average number of shares outstanding during each
reporting period, which may differ on a quarter-to-quarter basis. As such, the sum of
the quarterly net loss per share amounts may not equal full-year net loss per share.
|
Historical
quarterly results of operations and net (loss) income cannot be taken as reflective of recurring revenue or expenditure patterns
of predictable trends, largely given the non-recurring nature of certain components of our historical revenues, due most notably
to unpredictable quarterly variations in net finance income, which are impacted by periodic “mark-to-market” revaluations
of our warrant liability and of foreign exchange gains and losses. In addition, we cannot predict what the revenues from royalties
will be earned from the License Agreement.
Use
of proceeds
We
began 2020 with $7.8 million in cash and cash equivalents. During the nine-month period ended September 30, 2020, our operating
activities consumed $6.6 million, our financing activities provided $20.5 million and our investing activities provided $0.1 million.
As at September 30, 2020 we had $21.8 million of cash and cash equivalents.
Liquidity
and capital reserves
Our
operations and capital expenditures have generally been financed through certain transactions impacting our cash flows from operating
activities, public equity offerings, registered direct offerings and issuances under various “at-the-market” offering
programs. In the first quarter of 2020, we closed the February 2020 Financing with net cash proceeds of $3.9 million. During the
current fiscal quarter, on July 7, 2020, the Company closed the July 2020 Financing for net proceeds of $10.6 million and the
August 2020 Financing for net proceeds of $6.3 million. See “Financing activities” under Key Developments on pages
2 and 3 of this MD&A.
|
|
Nine
months ended September 30,
|
|
(in
thousands)
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - Beginning of period
|
|
|
7,838
|
|
|
|
14,512
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
cash (used in) operating activities
|
|
|
(6,647
|
)
|
|
|
(7,771
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
20,485
|
|
|
|
4,054
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
56
|
|
|
|
50
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
14
|
|
|
|
17
|
|
Cash
and cash equivalents - End of period
|
|
|
21,746
|
|
|
|
10,862
|
|
Operating
Activities
Cash
used by operating activities totaled $6.6 million for the nine months ended September 30, 2020, as compared to $7.8 million used
by operating activities in the same period in 2019. This $1.2 million improvement in operating activities is attributed primarily
to the increase in product sales and supply chain activities, the impact of the June 2019 restructuring in Germany, primarily
impacting payroll and share-based compensation costs, and the reduced costs of Study P01 given the differing stage of execution,
in the first nine months of 2020 as compared to the first nine months of 2019.
Financing
Activities
Cash
provided by financing activities totaled $20.5 million for the nine months ended September 30, 2020, as compared with cash provided
by financing activities of $4.1 million in the same period in 2019. On February 21, 2020, the Company closed the February 2020
Financing with net cash proceeds of $3.9 million. The Company also closed the July 2020 Financing with net proceeds of $10.6 million
and the August 2020 Financing with net proceeds of $6.3 million (2019 – closed the September 2019 financing for $4.2 million).
Capital
stock
As
at November 5, 2020, we had 62,678,613 common shares issued and outstanding, as well as 326,410 stock options, 173,000 deferred
share units and 47,232,366 share purchase warrants outstanding.
Warrants
|
|
Warrants
|
|
|
Exercise
Price
|
|
|
|
|
|
#
|
|
|
$
|
|
|
Expiry
date
|
December
2015 registered direct offering
|
|
|
2,331,000
|
|
|
|
7.10
|
|
|
December
13, 2020
|
September
2019 registered direct offering
|
|
|
3,325,000
|
|
|
|
1.65
|
|
|
September
24, 2024
|
February 2020
Financing
|
|
|
2,608,696
|
|
|
|
1.20
|
|
|
August 21,
2025
|
February 2020
Financing
|
|
|
243,478
|
|
|
|
1.61719
|
|
|
February 19,
2025
|
July 2020
Financing
|
|
|
26,666,666
|
|
|
|
0.45
|
|
|
July 7, 2025
|
July 2020
Financing
|
|
|
1,866,667
|
|
|
|
0.5625
|
|
|
July 1, 2025
|
August 2020
Financing
|
|
|
9,320,907
|
|
|
|
0.47
|
|
|
February 5,
2026
|
August 2020
Financing
|
|
|
869,952
|
|
|
|
0.7040625
|
|
|
August 3,
2025
|
|
|
|
47,232,366
|
|
|
|
|
|
|
|
On
March 10, 2020, we had 28,144 share purchase warrants expire, each with an exercise price of $1.07 and on May 1, 2020 we had 945,000
share purchase warrants expire, each with an exercise price of $4.70.
Long-term
incentive and stock option plan
|
|
|
Nine
months ended September 30, 2020
|
|
|
|
|
US$
Stock options
|
|
|
Weighted
average
exercise price
|
|
|
DSUs
|
|
|
CAN$
Stock options
|
|
|
Weighted
average
exercise price
|
|
September
30, 2020
|
|
|
(Number)
|
|
|
(US$)
|
|
|
(Number)
|
|
|
(Number)
|
|
|
(CAN$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
– Beginning of period
|
|
|
|
741,116
|
|
|
|
3.61
|
|
|
|
212,000
|
|
|
|
441
|
|
|
|
912.00
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,000
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(159,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Canceled/Forfeited
|
|
|
|
(330,350
|
)
|
|
|
2.14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
|
(84,366
|
)
|
|
|
15.51
|
|
|
|
—
|
|
|
|
(431
|
)
|
|
|
912.00
|
|
|
Balance
– End of period
|
|
|
|
326,400
|
|
|
|
2.03
|
|
|
|
173,000
|
|
|
|
10
|
|
|
|
912.00
|
|
Adequacy
of financial resources
Since
inception, the Company has incurred significant expenses in its efforts to develop and co-promote products. Consequently, the
Company has incurred operating losses and negative cash flow from operations historically and in each of the last several years
except for the year ended December 31, 2018 when the Company earned revenue from the sale of a license for the adult indication
of Macrilen™ (macimorelin) in the United States and Canada. As at September 30, 2020, the Company had an accumulated deficit
of $321.4 million. The Company also had a net loss of $3.8 million for the nine months ended September 30, 2020, and negative
cash flow from operations of $6.6 million.
The
Company’s principal focus is on the commercialization of Macrilen™ (macimorelin) and it currently does not have any
other approved products. Under the terms of the License Agreement, Novo is funding 70% of the pediatric clinical development submitted
to the EMA and FDA, the Company’s sole development activity. In November 2019, Novo contracted AEZS Germany, our wholly
owned German subsidiary, to provide supply chain services for the manufacture of Macrilen™ (macimorelin). In April 2020,
we announced the results from Study P01 to establish a dose that can both be safely administered to pediatric patients and cause
a clear rise in growth hormone concentration in subjects ultimately diagnosed as not having growth hormone deficiency. The Company
plans to proceed with the pivotal second study, Study P02, with an expected start date in the first quarter of 2021 and an expected
completion date in July 2022, according to the PIP agreement with the EMA. Study P02 is designed to investigate the diagnostic
efficacy and safety of macimorelin acetate in pediatric patients from two to less than 18 years of age with suspected growth hormone
deficiency.
As
at September 30, 2020, a limited portion of the Company’s cash is held in AEZS Germany, the Company’s principle operating
subsidiary. AEZS Germany is the counter-party to the License Agreement described above with Novo, and as such, for generating
future revenue earned under the License Agreement. Management considers the cash resources available to AEZS Germany in executing
its obligations under the License Agreement. In the event the current and medium term liabilities of AEZS Germany exceed the fair
values ascribed to its assets, under German solvency laws, it may no longer be possible for AEZS Germany’s operations to
continue or for AEZS Germany to transfer cash to Aeterna Zentaris Inc or its U.S. subsidiary, if needed.
In
2020, the COVID-19 pandemic began causing significant financial market declines and social dislocation. The situation is dynamic
with various cities and countries around the world responding in different ways to address the outbreak. The spread of COVID-19
may impact our operations, including the potential interruption of our clinical trial activities and our supply chain, or that
of our licensee. For example, the COVID-19 outbreak may delay enrollment in our clinical trial due to prioritization of hospital
resources toward the outbreak, and some patients may be unwilling to be enrolled in our trials or be unable to comply with clinical
trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay our ability to conduct
clinical trials or release clinical trial results and could delay our ability to obtain regulatory approval and commercialize
our product candidates. The pandemic may also impact the ability of our suppliers to deliver components or raw materials on a
timely basis or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the
spread of an infectious disease. Our licensee may be impacted due to significant delays of diagnostic activities in the U.S. To
date, the Company has not experienced significant business disruption from COVID-19.
Contractual
obligations and commitments
(in
thousands)
|
|
Service
and manufacturing
|
|
|
|
$
|
|
Less
than 1 year
|
|
|
1,248
|
|
1 - 3 years
|
|
|
5
|
|
4 - 5 years
|
|
|
5
|
|
More
than 5 years
|
|
|
1
|
|
Total
|
|
|
1,259
|
|
Contingencies
In
the normal course of operations, the Company may become involved in various claims and legal proceedings related to, for example,
contract terminations and employee-related and other matters.
Securities
class action lawsuit
On
March 9, 2020, the Company settled the previously disclosed class-action lawsuit against it pending in the U.S. District Court
for the District of New Jersey. This settlement remains subject to execution of final settlement documents and approval by the
U.S. District Court for the District of New Jersey.
Related
Party Transactions and Off-Balance Sheet Arrangements
Other
than employment agreements and indemnification agreements with our management, there are no related party transactions.
As
at September 30, 2020, we did not have any interests in special purpose entities or any other off-balance sheet arrangements.
Risk
Factors and Uncertainties
An
investment in our securities involves a high degree of risk. In addition to the other information included in this MD&A and
in the related consolidated financial statements, investors are urged to carefully consider the risks described below and under
the caption “Risk Factors and Uncertainties” in our most recent Annual Report on Form 20-F for the year ended December
31, 2019 for a discussion of the various risks that may materially affect our business. The risks and uncertainties not presently
known to us or that we currently deem immaterial may also materially harm our business, operating results and financial condition
and could result in a complete loss of your investment.
Risks
Relating to Us and Our Business
Our
common shares may be delisted from the NASDAQ or the TSX, which could affect their market price and liquidity. If our common shares
were to be delisted, investors may have difficulty in disposing their common shares.
Our
common shares are currently listed on both the NASDAQ and the TSX under the symbol “AEZS”. We must meet continuing
listing requirements to maintain the listing of our common shares on the NASDAQ and the TSX. For continued listing, the NASDAQ
requires, among other things, that listed securities maintain a minimum closing bid price of not less than $1.00 per share. On
July 27, 2020, we received a letter from the Staff, notifying us that for the last 30 consecutive business days prior to the date
of the letter, the closing bid price of our common shares was below $1.00 per share and, therefore, we did not meet the requirement
for continued listing on the NASDAQ as required by Bid Price Rule. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have
been provided a grace period of 180 calendar days, through January 25, 2021, to evidence compliance with the Bid Price Rule. To
evidence compliance, we must evidence a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business
days on or before January 25, 2021. In the event we do not timely evidence compliance with the Bid Price Rule, we may be eligible
for an additional 180-day grace period or may face delisting. In the latter case, we would be entitled to request a hearing before
the Nasdaq Hearings Panel, which request would stay any delisting action by the Staff pending completion of the hearing process.
NASDAQ’s notice has no immediate effect on the listing of our common shares on the NASDAQ and does not otherwise impact
our listing on the TSX. We are considering the options available to us to evidence compliance with the Bid Price Rule prior to
the expiration of the grace period.
In
addition to the minimum bid price requirement, the continued listing rules of the NASDAQ require us to meet at least one of the
Additional Listing Standards. If we fail to meet at least one of the Additional Listing Standards, our common shares may be subject
to delisting after the expiration of the period of time, if any, that we are allowed for regaining compliance.
On
April 8, 2020, we received a letter from the Staff, notifying us that, based upon the net loss for the fiscal year ended December
31, 2019, the Company no longer satisfies the minimum net income requirement for continued listing on the NASDAQ under Nasdaq
Listing Rule 5550(b)(3) and does not otherwise satisfy the alternative requirements of market value of listed securities or stockholders’
equity. The Company timely submitted a plan to regain compliance with Nasdaq Listing Rule 5550(b)(3), and on June 3, 2020 the
Staff granted the Company an extension of 180 days, through October 5, 2020, to evidence compliance with this requirement. On
July 1, 2020, we priced an approximate $12 million public offering of our common shares and warrants, pursuant to which we ultimately
raised approximately $10.5 million in net proceeds. As a result of the offering, on July 30, 2020, we received a letter from the
Staff notifying us that the Staff determined that we comply with the stockholders’ equity component of the rules, subject
to being delisted if in a future periodic report we fail to evidence compliance. There is no assurance that we will maintain compliance,
and therefore there can be no assurance that our common shares will remain listed on the NASDAQ or the TSX. If we fail to meet
any of the NASDAQ’s or the TSX’s continued listing requirements, our common shares may be delisted. Any delisting
of our common shares may adversely affect our ability to raise additional financing through the public or private sale of equity
securities, would significantly adversely affect the ability of investors to trade our securities and would negatively affect
the value and liquidity of our common shares. Delisting could also have other negative results, including the potential loss of
confidence by employees, the loss of institutional investor interest and fewer business opportunities. If our common shares are
delisted by the NASDAQ or the TSX, the price of our common shares may decline, and a shareholder may find it more difficult to
dispose, or obtain quotations as to the market value, of such shares. Moreover, if we are delisted, we could incur additional
costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market
liquidity of our common shares and the ability of our shareholders to sell our common shares in the secondary market.
It
is possible that we may be a passive foreign investment company, which could result in adverse tax consequences to U.S. investors.
Adverse
U.S. federal income tax rules apply to “U.S. Holders” (as defined in “Taxation” in our most recent Annual
Report on Form 20-F) who directly or indirectly hold stock of a passive foreign investment company (“PFIC”). We will
be classified as a PFIC for U.S. federal income tax purposes for a taxable year if (i) at least 75% of our gross income is “passive
income” or (ii) at least 50% of the average value of our assets, including goodwill (based on annual quarterly average),
is attributable to assets which produce passive income or are held for the production of passive income.
The
determination of whether we are, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal
income tax rules, which are subject to various interpretations. Although the matter is not free from doubt, we believe that we
were not a PFIC during our 2019 taxable year and will not likely be a PFIC during our 2020 taxable year. Because PFIC status is
based on our income, assets and activities for the entire taxable year, and our market capitalization, it is not possible to determine
whether we will be characterized as a PFIC for the 2020 taxable year until after the close of the taxable year. The tests for
determining PFIC status are subject to a number of uncertainties. These tests are applied annually, and it is difficult to accurately
predict future income, assets and activities relevant to this determination. In addition, because the market price of our common
shares is likely to fluctuate, the market price may affect the determination of whether we will be considered a PFIC. There can
be no assurance that we will not be considered a PFIC for any taxable year (including our 2020 taxable year).
If
we are a PFIC for any taxable year during which a U.S. Holder holds common shares, we generally would continue to be treated as
a PFIC with respect to that U.S. Holder for all succeeding years during which the U.S. Holder holds such common shares, even if
we ceased to meet the threshold requirements for PFIC status. Accordingly, no assurance can be given that we will not constitute
a PFIC in the current (or any future) tax year or that the Internal Revenue Service (the “IRS”) will not challenge
any determination made by us concerning our PFIC status. PFIC characterization could result in adverse U.S. federal income tax
consequences to U.S. Holders. In particular, absent certain elections, a U.S. Holder would generally be subject to U.S. federal
income tax at ordinary income tax rates, plus a possible interest charge, in respect of a gain derived from a disposition of our
common shares, as well as certain distributions by us. If we are treated as a PFIC for any taxable year, a U.S. Holder may be
able to make an election to “mark-to-market” common shares each taxable year and recognize ordinary income pursuant
to such election based upon increases in the value of the common shares. A mark-to-market election will be unavailable with respect
to our Common Warrants and is not expected to be available with respect to the Pre-Funded Warrants, which are not likely to be
treated as regularly traded on a qualified exchange.
In
addition, U.S. Holders may mitigate the adverse tax consequences of the PFIC rules by making a “qualified electing fund”
(“QEF”) election; however, there can be no assurance that we will satisfy the record keeping requirements applicable
to a QEF or that we will provide the information regarding our income that would be necessary for a U.S. Holder to make a QEF
election.
If
the Company is a PFIC, U.S. Holders will generally be required to file an annual information return with the IRS (on IRS Form
8621, which PFIC shareholders will be required to file with their U.S. federal income tax or information returns) relating to
their ownership of common shares. This filing requirement is in addition to any pre-existing reporting requirements that apply
to a U.S. Holder’s interest in a PFIC (which this requirement does not affect).
For
a more detailed discussion of the potential tax impact of us being a PFIC, please see “Taxation” in our most recent
Annual Report on Form 20-F. The PFIC rules are complex. U.S. Holders should consult their tax advisors regarding the potential
application of the PFIC regime and any reporting obligations to which they may be subject under that regime.
Our
net operating losses may be limited for U.S. federal income tax purposes under Section 382 of the Internal Revenue Code.
If
a corporation with net operating losses (“NOLs”) undergoes an “ownership change” within the meaning of
Section 382 of the United States Internal Revenue Code of 1986, as amended, then such corporation’s use of such “pre-change”
NOLs to offset income incurred following such ownership change may be limited. Such limitation also may apply to certain losses
or deductions that are “built-in” (i.e., attributable to periods prior to the ownership change, but not yet taken
into account for tax purposes) as of the date of the ownership change that are subsequently recognized. An ownership change generally
occurs when there is either (i) a shift in ownership involving one or more “5% shareholders,” or (ii) an “equity
structure shift” and, as a result, the percentage of stock of the corporation owned by one or more 5% shareholders (based
on value) has increased by more than 50 percentage points over the lowest percentage of stock of the corporation owned by such
shareholders during the “testing period” (generally the 3 years preceding the testing date). In general, if such change
occurs, the corporation’s ability to utilize its net operating loss carry-forwards and certain other tax attributes would
be subject to an annual limitation, as described below. The unused portion of any such net operating loss carry-forwards or tax
attributes each year is carried forward, subject to the same limitation in future years. The impact of an ownership change on
state NOL carryforwards may vary from state to state. Due to previous ownership changes, or if we undergo any future ownership
change, our ability to use our NOLs could be limited by Section 382 of the Code. Future changes in our stock ownership, some of
which are outside of our control, could result in an ownership change under Sections 382 of the Code. Recent legislation added
several limitations to the ability to claim deductions for NOLs in future years, particularly for tax years beginning after December
31, 2020, including a deduction limit equal to 80% of taxable income and a restriction on NOL carryback deductions. For these
reasons, we may not be able to use a material portion of the NOLs, even if we attain profitability.
Our
most recent Annual Report on Form 20-F was filed with the relevant Canadian securities regulatory authorities in lieu of an annual
information form at www.sedar.com and with the SEC at www.sec.gov, and investors are urged to consult such risk factors.
Disclosure
Controls and Procedures
Under
the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer,
we have evaluated the effectiveness of our disclosure controls and procedures as at September 30, 2020. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective
as at September 30, 2020.
Management’s
Annual Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB.
Our
internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Aeterna Zentaris;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations
of Company management; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of Company assets that could have a material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established
in Internal Control – Integrated Framework: 2013 issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management has concluded that our internal control over financial reporting was effective
as at September 30, 2020.
Changes
in Internal Controls over Financial Reporting
There
were no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
The
design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of certain events.
There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, including
conditions that are remote.
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