AEZS Aeterna Zentaris Inc

Aeterna Zentaris Inc. (NASDAQ: AEZS) (TSX: AEZS) (“Aeterna” or the “Company”), a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests, today reported its financial and operating results for the fourth quarter and year ended December 31, 2020.

The Company also provided an update on the recent expansion of its development pipeline and clinical program of macimorelin for the diagnosis of childhood-onset growth hormone deficiency (“CGHD”), an area of significant unmet medical need.

“As a company, one of our key objectives over the past year was to advance our goal of maximizing the value of macimorelin and to expand our pipeline with multiple development programs. I am extremely pleased that we have been successful in progressing our goals across multiple fronts,” commented Dr. Klaus Paulini, Chief Executive Officer of Aeterna. “Not only are we preparing to launch the pivotal Study P02 for the diagnosis of CGHD but we are working with the University of Queensland to explore the potential therapeutic use of macimorelin for the treatment of a serious neurodegenerative disease. Additionally, we made significant progress with our pipeline expansion efforts and entered into a number of previously announced agreements with university partners providing Aeterna with the right to develop a number of potential therapeutics and vaccines. Lastly, we have secured significant capital that we believe provides us with optionality as we continue to pursue growth as well as to accelerate our planned pipeline development opportunities in potentially high-value indications.”

Recent Highlights:

• Regained compliance with minimum bid price requirement for continued listing on Nasdaq;
• Closed bought deal offering of common shares for gross proceeds of $34.2 million;
• Received $20.0 million in proceeds from exercise of warrants in 2021;
• Entered into a material transfer agreement with The University of Queensland (“Queensland University”), for the advancement of macimorelin as a therapeutic for the treatment of an undisclosed neurodegenerative disease which provides Aeterna with an option to negotiate a license to any intellectual property developed by Queensland University using macimorelin as therapeutic for the undisclosed neurodegenerative disease;
• Executed on building pipeline to expand assets in development for potential high-value indications through multiple licensing agreements with universities in Europe;
• Announced an exclusive European licensing agreement with Consilient Health Ltd. for the commercialization of macimorelin; and
• Amended its existing License Agreement with Novo Nordisk Biopharm Limited (“Novo Nordisk”) for the development and commercialization of Macrilen™ (macimorelin) in U.S. and Canada.

Macimorelin Clinical and Preclinical Program Update

Aeterna is currently developing macimorelin for the diagnosis of CGHD, an area of significant unmet need, in collaboration with Novo Nordisk. Preparations are underway to initiate Study P02, an open-label, single dose, multicenter and multinational pivotal study expected to enroll approximately 100 subjects worldwide. At least 40 pre-pubertal and 40 pubertal subjects are expected to be enrolled and a minimum of 25 subjects are expected to be enrolled in the USA. The study design is expected to be suitable to support a claim for potential stand-alone testing with macimorelin, if successful. The Company expects to commence its CGHD safety and efficacy study, Study P02, in the second quarter of 2021.

Additionally, Aeterna has begun exploring the potential therapeutic use of macimorelin in other indications. The Company entered into a Material Transfer Agreement with Queensland University, one of Australia’s leading research and teaching institutions, to conduct preclinical and clinical studies evaluating macimorelin as a potential therapeutic for the treatment of an undisclosed neurodegenerative disease. Queensland University researchers aim to conduct preclinical studies in multiple models to demonstrate the therapeutic reach of macimorelin on disease progression and disease-specific pathology and, if supported by the data from those studies, then plan a subsequent investigator initiated clinical study.

Pipeline Expansion

Aeterna continues to strive to balance risks and secure growth opportunities by re-establishing a diversified, yet focused, development pipeline which we believe best leverages the Company’s expertise and experience. The Company remains focused on utilizing its network with researchers in Europe and the U.S. to seek opportunities to access innovative development candidates, with a focus on rare or orphan indications and potential for pediatric use.

Targeted Immunosuppressive Therapeutics: Targeted, highly specific AIM Biologicals for the potential treatment of NMOSD

In January 2021, the Company entered into an exclusive license agreement with Julius-Maximilians-University of Wuerzburg, Germany for worldwide rights to develop, manufacture and commercialize targeted, highly specific immunosuppressive therapeutic proteins (“AIM Biologicals”) for the potential treatment of neuromyelitis optica spectrum disorder (“NMOSD”) currently in pre-clinical development.

Next Steps

• Conduct further preclinical research to identify and characterize an AIM Biologicals based development candidate for the treatment of NMOSD.
• Meet with regulatory authorities to confirm the further preclinical data required to advance into human clinical trials.

COVID-19 Vaccine: Potential orally active COVID-19 (SARS-CoV-2) live-attenuated bacterial vaccine

In February 2021, Aeterna entered into an exclusive option agreement with Julius-Maximilians-University to evaluate a preclinical, potential COVID-19 vaccine developed at the University. In March 2021, the Company exercised its option and entered into a license agreement where the Company was granted an exclusive, world-wide, license to certain patents and know-how owned by the University to research and develop, manufacture, and sell a potential COVID-19 vaccine. The University also granted Aeterna an option for the exclusive use of certain patents and know-how in an additional undisclosed field. The Company has six (6) months from the date of the License Agreement to exercise that option. Additionally, Aeterna entered into a Research Agreement under which the Company has engaged the University on a fee-for-service basis to conduct supplementary research activities and preclinical development studies on the potential vaccine, the results of which will be included within the scope of the license agreement.

Next Steps

• Select from a set of vaccine candidates to perform further in vitro and in vivo characterization before selecting the most active and stable bacterial strain for further preclinical and potentially clinical development.
• Initiate development work on an oral dosage form of such COVID-19 vaccine which is also potentially active against mutated virus variants.

Primary Hypoparathyroidism: Delayed clearance parathyroid hormone fusion polypeptides (DC-PTH) for potential treatment of primary hypoparathyroidism

In March 2021, Aeterna entered into an exclusive license agreement with The University of Sheffield, United Kingdom, for the intellectual property relating to DC-PTH fusion polypeptides with delayed clearance covering the field of all human use. Aeterna has also engaged the University of Sheffield under a research contract to conduct certain research activities to be funded by Aeterna, the results of which will be included within the scope of the license agreement.

Next Steps

• Working with the University, Aeterna will undertake certain additional confirmatory research prior to initiating formal preclinical toxicology studies and GMP development before finalizing plans for the potential initiation of human clinical trials.

Financing and Warrant Exercises

Between January 1, 2021 and March 24, 2021, the Company has raised net proceeds of approximately $31.0 million from a registered public offering and $20.0 million from warrant exercises. On February 19, 2021, the Company closed a public offering of 20,509,746 common shares at a price to the public of $1.45 per common share, for gross proceeds of $29.7 million, before deducting underwriting discounts, commissions and offering expenses payable by the Company, in the amount of $2.8 million. Aeterna also granted the underwriter a 30-day overallotment option (the “Underwriter Option”) to purchase up to 3,076,461 additional common shares at the public offering price, less underwriting discounts and commissions, and 1,435,682 warrants with an exercise price of $1.8125 and expiring on February 17, 2026. The net cash proceeds to the Company from the offering totaled $26.9 million. On February 22, 2021, the underwriter exercised the Underwriter Option in full and received 3,076,461 common shares for gross proceeds to the Company of $4.5 million. In connection with the public offering and the exercise of the Underwriter Option, the Company paid commissions and other expenses of $0.4 million and issued 215,352 warrants priced at $1.8125 and expiring on February 17, 2026.

Summary of Fourth Quarter and Full Year 2020 Financial Results

All amounts are in U.S. dollars

Results of operations for the three-month period ended December 31, 2020

For the three-month period ended December 31, 2020, we reported a consolidated net loss of $1.3 million, or $0.02 loss per common share (basic), as compared with a consolidated net loss of $1.0 million, or $0.05 loss per common share for the three-month period ended December 31, 2019. The $0.3 million increase in net results is primarily from an increase in total operating expenses of $1.8 million, an increase in net finance costs of $0.2 million, a change of tax expenses of $0.6 million partially offset by an increase in revenues of $2.3 million.

Revenues

• Our total revenue for the three-month period ended December 31, 2020 was $2.4 million as compared with $0.02 million for the same period in 2019, representing an increase of $2.4 million. The 2020 revenue was comprised of $1.4 million in product sales (2019 - $nil), $0.9 million in licensing revenue (2019 - $0.02 million), $0.02 million in royalty revenue (2019 - $0.2 million) and $0.1 million in supply chain revenue (2019 – ($0.02) million).
• On November 16, 2020, the Company announced that it had entered into the Amendment of its existing License Agreement with Novo Nordisk and received an upfront payment of €5.0 million ($6.1 million) in December 2020. In accordance with its accounting policy on contract amendments, the Company recognized $0.6 million to the Adult Indication as in revenues and deferred $5.5 million to be recognized over time on a straight-line basis until the expected FDA approval date of June 2023.

Operating Expenses

• Our total operating expense for the three-month period ended December 31, 2020 was $3.6 million as compared with $1.8 million for the same period in 2019, representing an increase of $1.8 million. This increase arises primarily from a $1.1 million increase in cost of sales, $0.4 million increase in research and development costs, $0.4 million increase in selling expenses and $0.5 million in costs incurred in the fourth quarter of 2019 and not incurred in the fourth quarter of 2020 (comprised of $0.3 million in restructuring costs and approximately $0.2 million in impairment of right of use asset), offset by a decline of $0.4 million in general and administrative expenses and a reversal of $0.1 million of write off of other asset.
• In the fourth quarter of 2020, cost of sales increased from the sale of a batch of macimorelin to Novo Nordisk. The increase in research and development costs reflect the Company’s initial pipeline expansion activities in 2020 as compared to close out activities for Study P01 in 2019.

Net Finance Income

• Our net finance income for the three-month period ended December 31, 2020 was $0.3 million as compared with $0.6 million for the same period in 2019, representing a decrease of $0.3 million. This is primarily due to a $0.5 million lower gain in the change in fair value of warrant liability offset by $0.3 million from changes in currency exchange rates. By December 31, 2020, the Company had registered all of the common shares underlying all of its issued and outstanding warrants.

Results of operations for the year ended December 31, 2020

For the twelve-month period ended December 31, 2020, we reported a consolidated net loss of $5.1 million, or $0.12 loss per common share, as compared with a consolidated net loss of $6.0 million, or $0.35 loss per common share (basic), for the twelve-month period ended December 31, 2019. The $0.9 million improvement in net results is primarily from an increase in total revenues of $3.1 million and a reduction of operating expenses of $1.4 million partially offset by a $3.0 million decline in net finance income and an increase in income tax expense of $0.6 million.

Revenues

• Our total revenue for the twelve-month period ended December 31, 2020 was $3.7 million as compared with $0.5 million for the same period in 2019, representing an increase of $3.2 million. The 2020 revenue was comprised of $2.4 million in product sales (2019 – $0.1 million), $0.9 million in licensing revenue (2019 - $0.07 million), $0.3 million in supply chain (2019 - $0.3 million) and $0.0.07 million in royalty income (2019 - $0.05 million).
• On November 16, 2020, the Company announced that it had entered into the Amendment of its existing License Agreement with Novo Nordisk and received an upfront payment of €5.0 million ($6.1 million) in December 2020. In accordance with its accounting policy on contract amendments, the Company recognized $0.6 million to the Adult Indication as in revenues and deferred $5.5 million to be recognized over time on a straight-line basis until the expected FDA approval date of June 2023.

Operating Expenses

• Our total operating expense for the twelve-month period ended December 31, 2020 was $9.4 million as compared with $10.8 million for the same period in 2019, representing a decrease of $1.4 million. This decline arises primarily from a $1.9 million reduction in general and administration expenses, a decrease of $0.5 million in restructuring costs, a $0.3 million reduction in research and development costs, a $0.3 million reversal in write off of other asset, a $0.2 million gain on modification of building lease and $0.1 million reduction in selling costs, offset by an increase of $1.9 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 twelve-month period ended December 31, 2020 was $1.0 million as compared with $4.0 million for the same period in 2019, representing a decrease of $3.0 million. This is primarily due to a $3.4 million change in fair value of warrant liability, an increase of $0.1 million in other finance costs and a $0.5 million increase in gain due to foreign currency exchange rates. Throughout 2020 and by December 31, 2020, the Company registered the common shares underlying all of its issued and outstanding warrants which removed the cashless exercise option from all warrants.

Consolidated Financial Statements and Management’s Discussion and Analysis

For reference, the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fourth quarter and full year 2020, as well as the Company’s audited consolidated financial statements as of December 31, 2020 and 2019, will be available at www.zentaris.com in the Investors section or at the Company’s profile at www.sedar.com and www.sec.gov.

About Aeterna Zentaris Inc.

Aeterna Zentaris Inc. is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company’s lead product, macimorelin, is the first and only U.S. FDA and European Commission approved oral test indicated for the diagnosis of adult growth hormone deficiency (AGHD). Macimorelin is currently marketed in the United States under the tradename Macrilen™ through a license agreement with Novo Nordisk where Aeterna receives royalties on net sales. According to a commercialization and supply agreement, MegaPharm Ltd. will seek regulatory approval and then commercialize macimorelin in Israel and the Palestinian Authority. Additionally, upon receipt of pricing and reimbursement approvals, Aeterna expects that macimorelin will be marketed in Europe and the United Kingdom through a recently established license agreement with Consilient Health Ltd. and Aeterna will receive royalties on net sales and other potential payments.

Aeterna is also leveraging the clinical success and compelling safety profile of macimorelin to develop it for the diagnosis of childhood-onset growth hormone deficiency (CGHD), an area of significant unmet need.

Aeterna is actively pursuing business development opportunities for the commercialization of macimorelin in Asia and the rest of the world, in addition to other non-strategic assets to monetize their value. For more information, please visit www.zentaris.com and connect with the Company on Twitter, LinkedIn and Facebook.

Forward-Looking Statements

This press release contains statements that may constitute forward-looking statements within the meaning of U.S. and Canadian securities legislation and regulations and such statements are made pursuant to the safe-harbor provision of the U.S. Securities Litigation Reform Act of 1995. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “potential,” “possible,” and similar expressions. Such statements, based as they are on current expectations of management, inherently involve numerous risks, uncertainties and assumptions, known and unknown, many of which are beyond our control. Forward-looking statements in this press release include, but are not limited to, those relating to: Aeterna’s expectation with respect to Study P02 (including the ability to commence in the second quarter of 2021, to enroll subjects in the USA or elsewhere in Study P02, and expectations that Study P02 are suitable to support a claim (regulatory approval) for potential stand-alone testing with macimorelin); Aeterna’s expectation that, upon receipt of pricing and reimbursement approvals, macimorelin will be marketed in Europe and the United Kingdom; the aims and details of the pre-clinical and potential clinical studies involving the potential use of macimorelin to treat an undisclosed neurodegenerative disease being conducted by Queensland University; the potential of the coronavirus vaccine platform technology licensed from Julius-Maximilians-University (and any vaccine candidates using that technology) to be effective as a vaccine against COVID-19 (SARS-CoV-2) or any other coronavirus disease or to offer an alternative to other approved vaccines against COVID-19; the ability to obtain approval to commence any clinical trial or the timeline to develop any potential vaccine and the characteristics of any potential vaccine; plans regarding the DC-PTH fusion polypeptides licensed from the University of Sheffield, plans regarding AIM Biologicals in-licensed from Julius-Maximilians-University and the potential to treat NMOSD; and Aeterna’s intentions with respect to growth opportunities and its business focus, including with respect to its cash position and development pipeline (including the ability to accelerate its development pipeline).

Forward-looking statements involve known and unknown risks and uncertainties, and other factors which may cause the actual results, performance or achievements stated herein to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such risks and uncertainties include, among others, our reliance on the success of the pediatric clinical trial in the European Union and U.S. for Macrilen™ (macimorelin); the commencement of Study P02 may be delayed or we may not obtain regulatory approval to initiate that study, we may be unable to enroll the expected number of subjects in Study P02 and the result of Study P02 may not support receipt of regulatory approval in CGHD, we may be delayed or unsuccessful in obtaining pricing and reimbursement approvals in Europe and the UK to market macimorelin; the coronavirus vaccine platform technology (and any vaccine candidates using that technology) licensed from Julius-Maximilians-University has never been tested in humans and so further pre-clinical or clinical studies of that technology and any vaccine developed using that technology may not be effective as a vaccine against COVID-19 (SARS-CoV-2) or any other coronavirus disease; that the timeline to develop a vaccine may be longer than expected; that such technology or vaccines may not be capable of being used orally, may not have the same characteristics as vaccines previously approved using the Salmonella Typhi Ty21a carrier strain; results from ongoing or planned pre-clinical studies of macimorelin by Queensland University or for our other products under development may not be successful or may not support advancing the product to human clinical trials; our ability to raise capital and obtain financing to continue our currently planned operations; 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 Nordisk; the global instability due to the global pandemic of COVID-19, and its unknown potential effect on our planned operations; our ability to enter into out-licensing, development, manufacturing, marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect. Investors should consult our quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties, including those risks discussed in our Annual Report on Form 40-F and annual information form, under the caption "Risk Factors". Given the 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.

No securities regulatory authority has either approved or disapproved of the contents of this news release. The Toronto Stock Exchange accepts no responsibility for the adequacy or accuracy of this release.

Investor Contact:

Jenene Thomas JTC Team T (US): +1 (833) 475-8247 E: aezs@jtcir.com