Aeterna Zentaris First Quarter 2013 Management's Discussion and Analysis of Financial Condition and Results of Operations Highlights AEZS-108 (Doxorubicin Peptide Conjugate) First patient treated for Phase 2 trial in tri

Management's Discussion and Analysis

of Financial Condition and Results of Operations

AEZS-108 (Doxorubicin Peptide Conjugate)

AEZS-130 (Oral Ghrelin Agonist)

Perifosine (Oral AKT Inhibitor)

Corporate Developments

Appointment of New President and CEO

First Quarter MD&A - 2013

Cetrotide Manufacturing Rights

This Management's Discussion and Analysis ("MD&A") provides a review of the results of operations, financial condition and cash flows of Aeterna Zentaris Inc. for the three-month period ended March 31, 2013. In this MD&A, "Aeterna Zentaris", the "Company", "we", "us", "our" and the "Group" mean Aeterna Zentaris Inc. and its subsidiaries. This discussion should be read in conjunction with the information contained in the Company's unaudited interim condensed consolidated financial statements as at March 31, 2013 and for the three-month periods ended March 31, 2013 and 2012 (the "interim consolidated financial statements").

All amounts in this MD&A are presented in U.S. dollars, except for share, option and warrant data, per share and per warrant data and as otherwise noted.

All shares, options and share purchase warrants as well as per share, option and share purchase warrant information for periods preceding October 2, 2012 have been adjusted, including proportionate adjustments being made to each stock option and share purchase warrant exercise price, to reflect and give effect to the Company's six-to-one share consolidation effected on such date.

About Forward-Looking Statements

This document contains forward-looking statements, which reflect our current expectations regarding future events. Forward-looking statements may include words such as "anticipate", "assuming", "believe", "could", "expect", "foresee", "goal", "guidance", "intend", "may", "objective", "outlook", "plan", "seek", "should", "strive", "target" and "will".

Forward-looking statements involve risks and uncertainties, many of which are discussed in this MD&A. Results or performance may differ significantly from expectations. For example, the results of current clinical trials cannot be foreseen, nor can changes in policy or actions taken by regulatory authorities such as the FDA, the European Medicines Agency ("EMA"), the Therapeutic Products Directorate of Health Canada or any other organization responsible for enforcing regulations in the pharmaceutical industry.

Given these uncertainties and risk factors, readers are cautioned not to place undue reliance on any 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 by applicable law.

First Quarter MD&A - 2013

About Material Information

This MD&A includes information that we believe to be material to investors after considering all circumstances, including potential market sensitivity. 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.

The Company is a reporting issuer under the securities legislation of all of the provinces of Canada, and its securities are registered with the United States Securities and Exchange Commission. The Company is therefore required to file or furnish continuous disclosure information such as interim and annual financial statements, MD&A, proxy 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 the Company's Investor Relations department or on the Internet at the following addresses: www.aezsinc.com, www.sedar.com and www.sec.gov.

Aeterna Zentaris Inc. (NASDAQ: AEZS and TSX: AEZ) is an oncology and endocrinology drug development company currently investigating treatments for various unmet medical needs. Our pipeline encompasses compounds at all stages of development, from drug discovery through to marketed products. We also benefit from agreements and arrangements with strategic collaborators and licensee partners, which contribute to the development of our pipeline of product candidates and in the establishment of commercial activities in specific territories.

Over the years, the Company has incurred recurring operating losses, having invested significantly in our R&D activities, as well as supporting our general and administrative expenses. We have financed our operations through different sources including the issuance of common shares and warrants, the conclusion of strategic alliances with licensee partners and research and development grants awarded by governmental agencies. The Company expects to continue to incur operating losses and may require significant capital to fulfill our future obligations. See the capital disclosures and the liquidity risk sections below.

In oncology, we are in the initiation process of a Phase 3 study under a Special Protocol Assessment ("SPA") with AEZS-108, a doxorubicin Luteinizing Hormone Releasing Hormone ("LHRH")-targeted conjugate compound, in endometrial cancer, for which we have successfully completed a Phase 2 trial in advanced endometrial and advanced ovarian cancer. We are also advancing Phase 2 trials with AEZS-108 in triple-negative breast cancer, refractory bladder cancer and castration- and taxane-resistant prostate cancer.

Our oncology pipeline also encompasses other earlier-stage programs, including AEZS-112, an oral anticancer agent which involves three mechanisms of action (tubulin, topoisomerase II and angiogenesis inhibition), which has completed a Phase 1 trial in advanced solid tumors and lymphoma. Additionally, several novel targeted anticancer candidates such as AEZS-120, a live recombinant oral tumor vaccine candidate, as well as our PI3K/Erk inhibitors, including AEZS-129, AEZS 134 and AEZS-136, are currently in preclinical development.

In endocrinology, we are preparing the submission of an NDA in the United States ("U.S.") for the registration of AEZS-130, an oral ghrelin agonist, as a diagnostic test for AGHD. A Phase 3 trial under an SPA with the FDA has been completed in this indication. Furthermore, AEZS-130 is in a Phase 2A trial for the treatment of cancer-induced cachexia.

First Quarter MD&A - 2013

Key Developments for the Three Months Ended March 31, 2013

Licensee Partners and Territories by Product

Merck Serono, World (except Japan) - Nippon Kayaku/Shionogi, Japan

Spectrum Pharmaceuticals, World (ex-Japan, Korea and other Asian countries) - Handok Pharmaceuticals, Korea and other Asian countries for BPH indication - Nippon Kayaku, Japan for oncology indications

Yakult Honsha, Japan - Handok Pharmaceuticals, Korea - Hikma Pharmaceuticals, Middle East/North Africa

First Quarter MD&A - 2013

Interim Consolidated Statements of Comprehensive Income (Loss) Information

First Quarter MD&A - 2013

Revenues are derived primarily from sales and royalties as well as from license fees. Sales are derived from Cetrotide (cetrorelix acetate solution for injection), marketed for reproductive health assistance for in vitro fertilization, as well as from Active Pharmaceutical Ingredients ("API"). Royalties are derived indirectly from ARES Trading S.A.'s ("Merck Serono") net sales of Cetrotide and represent the periodic amortization, under the units-of-revenue method, of the proceeds received in connection with the 2008 sale to Cowen Healthcare Royalty Partners L.P. ("Cowen") of the underlying future royalty stream.

License fees include periodic milestone payments, research and development ("R&D") contract fees and the amortization of upfront payments received from our licensing partners.

Sales and royalties were $10.2 million for the three-month period ended March 31, 2013, compared to $8.3 million for the same period in 2012. The increase is largely attributable to comparative higher deliveries of Cetrotide to certain customers.

As mentioned above, we are evaluating the impact that the Cetrotide Transactions may have on our consolidated financial statements including the determination as to whether or not the presentation on a gross basis in the statement of comprehensive income (loss) of revenues with respect to Cetrotide remains appropriate.

License fees and other revenues were $6.4 million for the three-month period ended March 31, 2013, as compared to $1.2 million for the same period in 2012. The significant increase is predominantly due to the recognition of unamortized deferred revenues related to upfront payments received from our licensee partners in connection with perifosine, following our decision to discontinue our Phase 3 trials of perifosine.

Cost of sales was $8.7 million for the three-month period ended March 31, 2013, as compared to $7.5 million for the same period in 2012. This increase is largely attributable to the increase in sales of Cetrotide , as discussed above. Additionally, cost of sales as a percentage of sales and royalties decreased to approximately 85%, as compared to 90% in the first quarter of 2012, due to a comparative increase of lot sizes delivered that have a lower production cost by unit.

As mentioned above, due to the Cetrotide Transactions, we are evaluating whether or not the presentation on a gross basis in the statement of comprehensive income (loss) of cost of sales with respect to Cetrotide remains appropriate.

R&D costs, net of refundable tax credits and grants, were $4.4 million for the three-month period ended March 31, 2013, compared to $5.6 million for the same period in 2012.

The decrease is attributable to lower employee compensation and benefit costs due to continued cost-saving measures resulting in a lower number of employees. The decrease is also related to comparative lower third-party costs associated with the development of most of our products, as described below.

The following table summarizes our net R&D costs by nature of expense:

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* Includes depreciation and amortization charges.

First Quarter MD&A - 2013

The following table summarizes primary third-party R&D costs, by product candidate, incurred by the Company during the three-month periods ended March 31, 2013 and 2012.

Excluding the impact of foreign exchange rate fluctuations and despite the discontinuance of the perifosine development, we expect net R&D costs to increase in the second quarter of 2013, compared to the first quarter of 2013, due to the advancement of AEZS 108 in different Phase 2 and 3 studies. Overall, excluding the impact of unforeseen foreign exchange rate fluctuations, we continue to expect that we will incur net R&D costs of between $21 million and $23 million for the full year 2013, particularly given our primary focus on developing AEZS 108 and certain earlier-stage compounds.

Selling, general and administrative ("SG&A") expenses were $3.8 million for the three-month period ended March 31, 2013, as compared to $3.2 million for the same period in 2012.

We expect SG&A expenses to increase in the second quarter of 2013, as compared to the first quarter of 2013, predominantly as a result of the termination benefits granted to our former CEO and to the related non-cash share-based compensation costs that we expect to recognize.

Net finance income (costs) are comprised predominantly of the change in fair value of warrant liability and the net gains (losses) due to changes in foreign currency exchange rates. For the three-month period ended March 31, 2013, net finance income (costs) totalled $2.2 million, as compared to $(4.7) million for the same period in 2012, as presented below.

The significant fluctuation in net finance income (costs), as compared to the same periods in 2012, is mainly due to the change in fair value of our warrant liability. That change results from the periodic "mark-to-market" revaluation, via the application of the Black-Scholes option pricing model, of currently outstanding share purchase warrants. The Black-Scholes "mark-to-market" warrant valuation most notably has been impacted by the closing price of our common shares, which, on NASDAQ,

First Quarter MD&A - 2013

has fluctuated from $9.24 to $12.84 for the three-month period ended on March 31, 2012 and from $2.38 to $1.88 for the period ended March 31, 2013. The fluctuation in net finance income (costs) is also related to gains or (losses) due to changes in foreign currency exchange rates, which are mainly related to the period-over-period strength or (weakness) of the euro against the U.S. dollars, as presented below.

Net income (loss) for the three-month period ended March 31, 2013 was $1.9 million or $0.07 per basic and diluted share, compared to $(11.5) million or $(0.65) per basic share and diluted share for the same period in 2012. The significant increase in net income for the three-month period ended March 31, 2013, as compared to the same period in 2012, is due largely to the significant increases in license fees revenues (non-cash) and in net finance income (non-cash), as well as to lower net R&D costs, partly compensated by higher SG&A.

Quarterly Consolidated Results of Operations Information

First quarter revenues of 2013 and second quarter revenues of 2012 increased, when compared quarter-over-quarter to each of the corresponding periods in 2013-2012 vs. 2012-2011, in part due to higher deliveries of Cetrotide to Merck Serono, partly offset by the weakening of the euro against the U.S. dollar for the second quarter of 2012. For the first quarter of 2013, the increase is also predominantly due to the recognition of approximately $6.1 million in deferred revenues related to licensing agreements after the development of perifosine was discontinued.

Third quarter revenues of 2012 and fourth quarter revenues of 2012 decreased when compared quarter-over-quarter to each of the corresponding periods in 2013-2012 vs. 2012-2011. The decreases are largely attributable to comparative lower deliveries

First Quarter MD&A - 2013

of Cetrotide to certain customers in the third quarter of 2012, to a decrease in license fee revenues from a partner in the fourth quarter of 2012 and to the relative weakening of the euro against the U.S. dollar.

In the last eight quarters, net income (loss) has been impacted by revenues, as mentioned above, by the comparative level of net R&D costs in connection with the development of perifosine, AEZS 108, AEZS 130 and certain earlier stage compounds. Net R&D costs decreased when compared quarter-over-quarter for each of the corresponding periods in 2013-2012 vs. 2012-2011. The quarter-over-quarter periods net income (loss) were also impacted by the recognition of impairment losses in the third and fourth quarters of 2011, as well as in the fourth quarter of 2012, by the initiation of prelaunch and marketing efforts related to the potential commercialization of perifosine in Europe in the third and fourth quarters of 2011, by a gain on our short-term investment recorded during the second and third quarters of 2011, by foreign exchange gains or losses and changes in fair value of our warrant liability, as well as by an income tax expense in the fourth quarter of 2011.

Interim Consolidated Statement of Financial Position Information

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* Comprised mainly of non-current portion of deferred revenues, employee future benefits and provision.

The decrease in cash and cash equivalents as at March 31, 2013, as compared to December 31, 2012, is due to the recurring disbursements and other variations in components of our working capital and the relative weakening, as at March 31, 2013, of the euro against the US dollar, as compared to December 31, 2012.

The decrease in trade and other receivables and other current assets as at March 31, 2013, as compared to December 31, 2012, is mainly due to lower trade accounts receivable which in turn are partly explained by earlier than normal cash receipts and by the relative weakening, as at March 31, 2013, of the euro against the US dollar, as compared to December 31, 2012.

The decrease in payables and other current liabilities as at March 31, 2013, as compared to December 31, 2012, is mainly due to a decrease in current portion of deferred revenues predominantly as a result of the recognition of unamortized deferred revenues related to upfront payments received from our licensee partners in connection with perifosine, as mentioned above, to lower trade accounts payable which in turn are partly explained by lower R&D expenses payable, and to the relative weakening, as at March 31, 2013, of the euro against the US dollar, as compared to December 31, 2012.

Our warrant liability decreased from December 31, 2012 to March 31, 2013 predominantly due to the change in fair value pursuant to the periodic "mark-to-market" revaluation of the underlying outstanding share purchase warrants, as discussed above.

First Quarter MD&A - 2013

The decrease in non-financial non-current liabilities as at March 31, 2013, as compared to December 31, 2012, is mainly due to a decrease in deferred revenues predominantly as a result of the recognition of unamortized deferred revenues related to upfront payments received from our licensee partners in connection with perifosine, as mentioned above and to the relative weakening, as at March 31, 2013, of the euro against the US dollar, as compared to December 31, 2012.

The decrease in shareholders' deficiency from December 31, 2012 to March 31, 2013 is mainly attributable to the decrease in our deficit due to the net income and the decrease in accumulated other comprehensive loss due to foreign currency translation gain, as well as the increase in other capital due to the recording of share-based compensation costs.

Financial Liabilities, Obligations and Commitments

We have certain contractual leasing obligations and purchase obligation commitments. Purchase obligation commitments mainly include R&D services and manufacturing agreements related to the production of Cetrotide and other R&D programs. The following tables summarize future cash requirements with respect to these obligations.

Future minimum lease payments and future minimum sublease payments expected to be received under non-cancellable operating leases (subleases), as well as future payments in connection with utility service agreements are as follows:

Service and manufacturing commitments given, which consist of R&D service agreements and manufacturing agreements for Cetrotide , are as follows:

First Quarter MD&A - 2013

In accordance with the assumptions used in the employee future benefits obligation calculations as at March 31, 2013, future benefits expected to be paid are as follows:

Outstanding Share Data

As at May 7, 2013, we had 25,329,288 common shares issued and outstanding, as well as 2,340,267 stock options outstanding. Warrants outstanding as at May 7, 2013 represented a total of 4,407,410 equivalent common shares.

Our objective in managing capital, primarily composed of cash and cash equivalents and shareholders' deficiency, is to ensure sufficient liquidity to fund R&D activities, general and administrative expenses, working capital and capital expenditures.

In the past, we have had access to liquidity through non-dilutive sources, including the sale of non-core assets, investment tax credits and grants, interest income, licensing and related services and royalties. Since 2009, we have raised capital via public equity offerings and drawdowns under various At-the-Market ("ATM") sales programs.

Our capital management objective remains the same as that in previous periods. The policy on dividends is to retain cash to keep funds available to finance the activities required to advance our product development pipeline.

We are not subject to any capital requirements imposed by any regulators or by any other external source.

Liquidity, Cash Flows and Capital Resources

Our operations and capital expenditures have been financed through cash flows from operating activities, public equity offerings, as well as from the drawdowns under various ATM programs, as discussed above.

Our cash and cash equivalents amounted to $33.2 million as at March 31, 2013, compared to $39.5 million as at December 31, 2012. As at March 31, 2013, cash and cash equivalents included 4.5 million, denominated in euro.

Based on our assessment, which took into account current cash levels, as well as our strategic plan and corresponding budgets and forecasts, we believe that we have sufficient liquidity and financial resources to fund planned expenditures and other working capital needs for at least, but not limited to, the 12-month period following the statement of financial position date of March 31, 2013.