Year marked by success in emerging as a late-stage pure play biopharmaceutical company QUEBEC CITY, March 5 /PRNewswire-FirstCall/ -- AEterna Zentaris Inc. (TSX: AEZ; NASDAQ: AEZS) today reported financial and operating results for the fourth quarter and full year ended December 31, 2006. "The year 2006 was driven by the significant advancement of our lead compounds into late-stage clinical development, while making a strategic decision to spin-off our subsidiary Atrium Biotechnologies and leverage our equity interest in the company. Ultimately, we were successful in reaching our goal of emerging as a late-stage pure play biopharmaceutical company," said Gilles Gagnon, AEterna Zentaris' President and Chief Executive Officer. "Our clinical trials delivered solid results across the board. Positive, highly statistically significant Phase 2 results with our flagship, product candidate cetrorelix in BPH led to the initiation of our Phase 3 program. We disclosed additional positive Phase 2 results for ozarelix in both BPH and prostate cancer and quickly initiated further Phase 2b trials in those indications. Perifosine yielded positive Phase 2 results for multiple forms of cancer and furthermore, we initiated several additional Phase 2 trials and foresee the potential to initiate a Phase 3 program before year end. "Our earlier-stage programs also provided additional proof of our world-class development capabilities as we disclosed positive Phase 1 results for AN-152 in gynaecological and breast cancers and initiated a Phase 1 trial with ZEN-012 for solid tumors. Moving forward, we have a sound financial position and remain committed to further invest in our lead compounds and bring them closer to market. We continue to strive to expose the depth, breadth and potential of our robust pipeline and will diligently execute our business plan providing opportunities to create additional value for our shareholders," concluded Mr. Gagnon. KEY DEVELOPMENTS FOR THE YEAR ENDED DECEMBER 31, 2006 CORPORATE EVOLUTION Spin-off of Atrium Biotechnologies - The decision by AEterna Zentaris to sell a portion of its ownership interest in Atrium by way of secondary offering, and to distribute its remaining interest to its shareholders represented the culmination of a lengthy and detailed review process in which the Company examined a number of strategic alternatives for how best to pursue and implement its business plan of becoming a "pure play" biopharmaceutical Company. The transaction was integral to the evolution of AEterna Zentaris as it affords the Company the necessary financial resources to execute a very focused strategy and emerge as a fully integrated, global specialist-driven biopharmaceutical company with a focus on endocrine therapy and oncology. ADVANCING THE PIPELINE Cetrorelix - Early in the year, the Company regained exclusive worldwide (ex-Japan) rights for its flagship, product candidate, cetrorelix in benign prostatic hyperplasia (BPH). After presenting positive Phase 2 data to the FDA, the Company announced the submission and acceptance of an Investigational New Drug (IND) and the initiation of an extensive, 1,500-patient late-stage Phase 3 program. Additionally, cetrorelix was the first LHRH antagonist to be launched in Japan under the trade name Cetrotide(R) for in vitro fertilization and is now marketed worldwide. Ozarelix - After expeditiously recruiting patients for Phase 2 trials in prostate cancer and BPH, the Company, along with its partner Spectrum Pharmaceuticals, reported positive data in both indications. An extended Phase 2b trial in prostate cancer was then initiated and subsequent to year end, a Phase 2b trial in BPH was initiated in the United States. Moreover, the Company granted its Japanese partner Nippon Kayaku, an exclusive license for ozarelix for all oncological indications in Japan. Perifosine - Throughout the year, the Company, along with its partner Keryx Biopharmaceuticals, announced positive data in multiple Phase 2 trials, as well as the initiation of additional Phase 1/2 trials in multiple cancers. Very encouraging interim data were reported from a multi-center, Phase 2 trial showing a 43% partial response rate in patients with advanced renal cell carcinoma. Additional positive interim Phase 2 data were reported in relapsed and refractory multiple myeloma showing an induction of response and/or disease stabilization in 69% of evaluable patients in combination with dexamethasone. AN-152 - Positive top-line Phase 1 results for the Company's cytotoxic conjugate, AN-152, in patients with gynaecological and breast cancers were reported. The data showed the compound's good safety profile and established the maximum tolerated dose (MTD) at 267 mg/m(2) which will be the recommended dose for a Phase 2 trial. In addition to good safety data, the trial provided a hint of efficacy as disease stabilization and regression of lesions were observed at the 160 mg/m(2) and 267 mg/m(2) dose levels. SUBSEQUENT TO YEAR END Neovastat - The Company has decided to terminate its development program being conducted with the National Cancer Institute (NCI) for Neovastat (AE-941). The decision was taken following interim results of the pivotal Phase 3 trial in non small-cell lung cancer which showed that Neovastat, combined with induction chemotherapy and concomitant chemoradiotherapy, has proven to be safe but did not reach the main endpoint of improving overall patient survival by 25% compared to the placebo-control arm. Overall, there were less patients experiencing severe side effects (more than grade 3) in the Neovastat arm compared to the placebo arm (p=0.018).The NCI has submitted an abstract and is awaiting acceptance by the American Society of Clinical Oncology (ASCO) for the upcoming annual meeting in June. ZEN-012 - AEterna Zentaris announced the initiation of a Phase 1 trial with its small molecule oral anti-cancer drug, ZEN-012, in patients with solid tumors and lymphoma, after the Company's IND application was accepted by the U.S. Food & Drug Administration (FDA) in late December 2006. This 50-patient, open-label, dose-escalation, multi-center, intermittent treatment trial is being conducted in the United States under the supervision of lead investigator, Daniel D. Von Hoff, MD, Senior Investigator at the Translational Genomics Research Institute in Phoenix, Arizona. CONSOLIDATED RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2006 (x)Please note that following the sale of a partial interest in the Company's former subsidiary, Atrium, closed on October 18, 2006, the former Active Ingredients & Specialty Chemicals Segment as well as the Health & Nutrition Segment have been reclassified as discontinued operations from January 1 to October 18, 2006 and for the years ended December 31, 2005 and 2004. Consolidated revenues for the fourth quarter ended December 31, 2006 were $12.6 million, a decrease of 11.9% compared to revenues of $14.3 million for the same period in 2005. Consolidated R&D expenses were $8.3 million for the fourth quarter ended December 31, 2006 compared to $8.2 million for the same period in 2005. Consolidated loss from operations for the fourth quarter 2006 were $6.8 million compared to $2 million for the same period in 2005. Consolidated net earnings from discontinued operations for the fourth quarter ended December 31, 2006 were $16.8 million compared to $4.5 million for the same period in 2005. The Company's consolidated net earnings were $39.1 million for the fourth quarter of 2006, or $0.74 per basic and diluted share, compared to $0.9 million, or $0.02 per basic and diluted share, for the same period in 2005. The consolidated cash and short-term investments were $61 million as of December 31, 2006. CONSOLIDATED RESULTS FOR THE FULL YEAR ENDED DECEMBER 31, 2006 Consolidated revenues for the 12-month period ended December 31, 2006 decreased by 12.3% to $41.4 million compared to $47.2 million for the same period in 2005. The decrease in 2006 is mainly attributable to a reduction in license revenues from the Company's collaboration with Solvay Pharmaceuticals, partly offset by milestone payments received from a Japanese partner with respect to the approval of Cetrotide(R) in Japan for in vitro fertilization, and from the Company's partner, Spectrum, related to the further development of ozarelix into Phase 2 for BPH and prostate cancer. Consolidated R&D expenses were $28.7 million in 2006 compared to $27.1 million for the same period in 2005. The increase in R&D is mainly due to additional expenses for further advancement of cetrorelix in BPH as well as for targeted, earlier-stage development programs. The Company reported a consolidated loss from operations for the 12-month period ended December 31, 2006 of $24.1 million compared to $9.6 million for the same period in 2005. The 2006 increase in loss from operations is attributable to a combination of lower license revenues, an increase in non-recurring corporate expenses, additional R&D expenses, as well as additional D&A expenses with respect to an impairment loss on non-core pharmaceutical development projects. This 2006 increase in loss from operations was partly offset by increased sales and royalties, as well as R&D investment tax credits. Consolidated net earnings for the 12-month period ended December 31, 2006 were $33.4 million, or $0.64 per basic share and $0.62 per diluted share, compared to $10.6 million, or $0.23 per basic share and diluted share, for the same period in 2005. The increase of the net earnings for the 12-month period ended December 31, 2006 is directly attributable to the recording of an income tax recovery for an amount of $29.1 million, lower interest expense for an amount of $5.7 million, due to the conversion of the term loans during the first quarter of the year, as well as increased revenues representing $1.6 million from the share in the results of an affiliated company partly offset by increased loss from operations. CONFERENCE CALL Management will be hosting a conference call for the investment community beginning at 10:30 a.m. Eastern Time today, Monday, March 5, to discuss fourth quarter and full-year 2006 results, as well outline its strategy and milestones for 2007. To participate in the live conference call by telephone, please dial 416-644-3417, 514-807-8791 or 800-732-6179. Individuals interested in listening to the conference call on the Internet may do so by visiting http://www.aeternazentaris.com/. A replay will be available on the Company's Web site for 30 days. About AEterna Zentaris Inc. AEterna Zentaris Inc. is a late-stage, global biopharmaceutical company focused on endocrine therapy and oncology with proven expertise in drug discovery, development and commercialization. News releases and additional information are available at http://www.aeternazentaris.com/. Forward-Looking Statements This press release contains forward-looking statements made pursuant to the safe harbor provisions of the U.S. Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which could cause the Company's actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of the Company to take advantage of business opportunities in the pharmaceutical industry, uncertainties related to the regulatory process and general changes in economic conditions. Investors should consult the Company's quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties relating to the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The Company does not undertake to update these forward-looking statements. AEterna Zentaris (In thousands of US dollars, except share and per share data) Three months ended Year ended CONSOLIDATED RESULTS December 31, December 31, Unaudited 2006 2005 2006 2005 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ Revenues Sales and royalties 7,518 5,933 27,740 23,674 License fees 5,113 8,340 13,652 23,530 ------------------------------------------------------------------------- 12,631 14,273 41,392 47,204 ------------------------------------------------------------------------- Operating expenses Cost of sales 3,709 2,486 11,747 8,596 Selling, general and administrative 4,335 4,156 17,235 15,281 R&D costs 8,283 8,198 28,652 27,075 R&D tax credits and grants (1,442) (157) (1,564) (536) Depreciation and amortization 4,540 1,578 9,429 6,371 ------------------------------------------------------------------------- 19,425 16,261 65,499 56,787 ------------------------------------------------------------------------- Loss from operations (6,794) (1,988) (24,107) (9,583) Interest income 703 362 1,446 1,238 Interest expense (153) (1,823) (1,450) (7,017) Foreign exchange gain (loss) 397 - 298 (88) Gain on disposal of a long-term investment 409 - 409 - Share in the results of an affiliated company 1,575 - 1,575 - ------------------------------------------------------------------------- Loss before the following: (3,863) (3,449) (21,829) (15,450) Income tax recovery (expense) 26,163 (70) 29,129 (493) ------------------------------------------------------------------------- Net earnings (loss) from continuing operations 22,300 (3,519) 7,300 (15,943) Net earnings from discontinued operations 16,801 4,455 26,090 26,514 ------------------------------------------------------------------------- Net earnings for the year 39,101 936 33,390 10,571 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings (loss) per share from continuing operations Basic and diluted 0.42 (0.08) 0.14 (0.35) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings per share Basic 0.74 0.02 0.64 0.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted 0.74 0.02 0.62 0.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares Basic 52,694,868 46,139,814 52,099,290 46,139,814 Diluted 53,035,786 46,139,814 52,549,260 46,139,814 Issued and outstanding shares 53,169,470 46,139,814 AEterna Zentaris (In thousands of US dollars, except share and per share data) December December CONSOLIDATED BALANCE SHEET 31, 31, Unaudited 2006 2005 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ Cash and short-term investments 61,019 34,861 Other current assets 40,704 128,815 --------------------- 101,723 163,676 Long-term assets 121,768 256,109 --------------------- Total assets 223,491 419,785 --------------------- --------------------- Current liabilities 16,310 64,174 Long-term debt 704 1,426 Other long-term liabilities 27,598 244,654 --------------------- 44,612 310,254 Shareholders' equity 178,879 109,531 --------------------- Total liabilities and shareholders' equity 223,491 419,785 --------------------- --------------------- DATASOURCE: AETERNA ZENTARIS INC. CONTACT: Jenene Thomas, Senior Director, Investor Relations & Corporate Communications, (418) 655-6420, ; Paul Burroughs, Media Relations, (418) 652-8525, ext. 406,

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