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Interim Consolidated Financial Statements
at March 31, 2020 and for the three-month period ended March 31, 2020 and 2019
in thousands of US dollars)
| Aeterna Zentaris Inc. |
| As at March 31, 2020 and for the three-month period ended March 31, 2020 and 2019 |
| Condensed Interim Consolidated Financial Statements |
| (Unaudited) |
| Condensed Interim Consolidated Statements of Financial Position | 3 |
| Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (Deficiency) | 5 |
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) | 6 |
| Condensed Interim Consolidated Statements of Cash Flows | 7 |
| Notes to Condensed Interim Consolidated Financial Statements | 8 |
| Aeterna Zentaris Inc. | ||
| Condensed Interim Consolidated Statements of Financial Position |
| (in thousands of US dollars) | ||||||||
| ( Unaudited ) | March 31, 2020 | December 31, 2019 | ||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | 9,182 | 7,838 | ||||||
| Trade and other receivables (note 6) | 665 | 658 | ||||||
| Inventory | 367 | 1,203 | ||||||
| Prepaid expenses and other current assets | 833 | 1,211 | ||||||
| Total current assets | 11,047 | 10,910 | ||||||
| Restricted cash equivalents | 358 | 364 | ||||||
| Right of use assets (note 7) | 288 | 582 | ||||||
| Property, plant and equipment | 31 | 35 | ||||||
| Identifiable intangible assets | 35 | 40 | ||||||
| Goodwill (note 8) | 7,882 | 8,050 | ||||||
| Total assets | 19,641 | 19,981 | ||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Payables and accrued liabilities (note 9) | 1,656 | 2,148 | ||||||
| Provision for restructuring and other costs (note 10) | 96 | 418 | ||||||
| Income taxes | 637 | 1,448 | ||||||
| Current portion of deferred revenues | 585 | 991 | ||||||
| Current portion of lease liabilities (note 11) | 216 | 648 | ||||||
| Current portion of warrant liability (note 12) | 1 | 6 | ||||||
| Total current liabilities | 3,191 | 5,659 | ||||||
| Deferred revenues | 166 | 185 | ||||||
| Lease liabilities (note 11) | 144 | 255 | ||||||
| Warrant liability (note 12) | 2,109 | 2,249 | ||||||
| Employee future benefits (note 13) | 12,056 | 13,788 | ||||||
| Non-current portion of provision for restructuring and other costs (note 10) | 288 | 308 | ||||||
| Total liabilities | 17,954 | 22,444 | ||||||
| SHAREHOLDERS' EQUITY (DEFICIENCY) | ||||||||
| Share capital | 226,413 | 224,528 | ||||||
| Other capital | 89,694 | 89,806 | ||||||
| Deficit | (314,724 | ) | (316,891 | ) | ||||
| Accumulated other comprehensive income | 304 | 94 | ||||||
| Total shareholders' equity (deficiency) | 1,687 | (2,463 | ) | |||||
| Total liabilities and shareholders' equity (deficiency) | 19,641 | 19,981 |
and contingencies (note 21)
accompanying notes are an integral part of these condensed interim consolidated financial statements.
| Aeterna Zentaris Inc. | ||
| Condensed Interim Consolidated Statements of Financial Position | ||
| (in thousands of US dollars) |
by the Board of Directors
| /s/ Carolyn Egbert | /s/ Pierre-Yves Desbiens | |
| Carolyn Egbert Chair of the Board | Pierre-Yves Desbiens Director |
Aeterna Zentaris Inc.
Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
the three months ended March 31, 2020 and 2019
| (in thousands of US dollars, except share data) | ||||||||||||||||||||||||
| (Unaudited) | Common shares (number of) | Share capital | Other capital | Deficit | Accumulated other comprehensive Income | Total | ||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
| Balance - January 1, 2020 | 19,994,510 | 224,528 | 89,806 | (316,891 | ) | 94 | (2,463 | ) | ||||||||||||||||
| Net income | - | - | - | 779 | - | 779 | ||||||||||||||||||
| Other comprehensive loss: | ||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | 210 | 210 | ||||||||||||||||||
| Actuarial gain on defined benefit plan (note 13) | - | - | - | 1,388 | - | 1,388 | ||||||||||||||||||
| Comprehensive income | - | - | - | 2,167 | 210 | 2,377 | ||||||||||||||||||
| Issuance of common shares and warrants, net (note 14) | 3,478,261 | 1,885 | - | - | - | 1,885 | ||||||||||||||||||
| Share-based compensation costs | - | - | (112 | ) | - | - | (112 | ) | ||||||||||||||||
| Balance - March 31, 2020 | 23,472,771 | 226,413 | 89,694 | (314,724 | ) | 304 | 1,687 |
| (Unaudited) | Common shares (number of) | Share capital | Other capital | Deficit | Accumulated other comprehensive Income | Total | ||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
| Balance - January 1, 2019 | 16,440,760 | 222,335 | 89,342 | (309,781 | ) | 11 | 1,907 | |||||||||||||||||
| Net (loss) | - | - | - | (4,911 | ) | - | (4,911 | ) | ||||||||||||||||
| Other comprehensive loss: | ||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | 84 | 84 | ||||||||||||||||||
| Actuarial (loss) on defined benefit plan | - | - | - | (735 | ) | - | (735 | ) | ||||||||||||||||
| Comprehensive (loss) | - | - | - | (5,646 | ) | 84 | (5,562 | ) | ||||||||||||||||
| Share-based compensation costs | - | - | 95 | - | - | 95 | ||||||||||||||||||
| Balance - March 31, 2019 | 16,440,760 | 222,335 | 89,437 | (315,427 | ) | 95 | (3,560 | ) |
accompanying notes are an integral part of these condensed interim consolidated financial statements.
Aeterna Zentaris Inc.
Interim Consolidated Statements of Comprehensive Income (Loss)
the three months ended March 31, 2020 and 2019
| (in thousands of US dollars, except share and per share data) | ||||||||
| Three months ended March 31, | ||||||||
| (Unaudited) | 2020 | 2019 | ||||||
| $ | $ | |||||||
| Revenues (note 5) | ||||||||
| Royalty income | 14 | 13 | ||||||
| Product sales | 1,016 | - | ||||||
| Supply chain | 41 | 6 | ||||||
| Licensing revenue | 19 | 18 | ||||||
| Total revenues | 1,090 | 37 | ||||||
| Operating expenses | ||||||||
| Cost of sales | 862 | - | ||||||
| Research and development costs | 319 | 528 | ||||||
| General and administrative expenses | 1,124 | 1,637 | ||||||
| Selling expenses | 248 | 304 | ||||||
| Impairment of right of use asset | - | 337 | ||||||
| Gain on modification of building lease (notes 7 and 11) | (185 | ) | - | |||||
| Impairment of prepaid asset | - | 169 | ||||||
| Total operating expenses (note 15) | 2,368 | 2,975 | ||||||
| Loss from operations | (1,278 | ) | (2,938 | ) | ||||
| (Loss) gain due to changes in foreign currency exchange rates | (104 | ) | 64 | |||||
| Change in fair value of warrant liability (note 12) | 2,470 | (2,061 | ) | |||||
| Other finance (costs) income | (309 | ) | 24 | |||||
| Net finance income (costs) | 2,057 | (1,973 | ) | |||||
| Net income (loss) | 779 | (4,911 | ) | |||||
| Other comprehensive income (loss): | ||||||||
| Items that may be reclassified subsequently to profit or loss: | ||||||||
| Foreign currency translation adjustments | 210 | 84 | ||||||
| Items that will not be reclassified to profit or loss: | ||||||||
| Actuarial gain (loss) on defined benefit plans (note 13) | 1,388 | (735 | ) | |||||
| Comprehensive income (loss) | 2,377 | (5,562 | ) | |||||
| Net income (loss) per share [basic] | 0.04 | (0.30 | ) | |||||
| Net income (loss) per share [diluted] | 0.04 | (0.30 | ) | |||||
| Weighted average number of shares outstanding (note 20): | ||||||||
| Basic | 21,523,416 | 16,440,760 | ||||||
| Diluted | 21,860,416 | 16,440,760 |
accompanying notes are an integral part of these condensed interim consolidated financial statements.
Aeterna Zentaris Inc.
Condensed Interim Consolidated Statements of Cash Flows
For the three months ended March 31, 2020 and 2019
thousands of US dollars, except share and per share data)
| Three months ended March 31, | ||||||||
| (Unaudited) | 2020 | 2019 | ||||||
| $ | $ | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) for the period | 779 | (4,911 | ) | |||||
| Items not affecting cash and cash equivalents: | ||||||||
| Change in fair value of warrant liability (note 12) | (2,470 | ) | 2,061 | |||||
| Transaction costs of warrants issued and expensed as finance cost | 310 | - | ||||||
| Provision for restructuring costs utilized (note 10) | (327 | ) | (17 | ) | ||||
| Depreciation and amortization | 107 | 66 | ||||||
| Impairment of right of use asset | - | 337 | ||||||
| Impairment of prepaid asset | - | 169 | ||||||
| Gain on modification of building lease (notes 7 and 11) | (185 | ) | - | |||||
| Share-based compensation costs | (112 | ) | 95 | |||||
| Employee future benefits (note 13) | 49 | 134 | ||||||
| Amortization of deferred revenues | (14 | ) | (18 | ) | ||||
| Foreign exchange gain (loss) on items denominated in foreign currencies | 52 | (45 | ) | |||||
| Gain on disposal of long-term assets | - | (3 | ) | |||||
| Other non-cash items | (15 | ) | - | |||||
| Interest accretion on lease liabilities (note 11) | (11 | ) | - | |||||
| Changes in operating assets and liabilities (note 16) | (607 | ) | (874 | ) | ||||
| Net cash used in operating activities | (2,444 | ) | (3,006 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common shares and warrants (notes 12 and 14) | 4,500 | - | ||||||
| Transaction costs (note 14) | (600 | ) | - | |||||
| Payments on lease liabilities (note 11) | (158 | ) | (151 | ) | ||||
| Net cash provided by (used in) financing activities | 3,742 | (151 | ) | |||||
| Cash flows from investing activities | ||||||||
| Change in restricted cash | - | 50 | ||||||
| Net cash provided by investing activities | - | 50 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 46 | (48 | ) | |||||
| Net change in cash and cash equivalents | 1,344 | (3,155 | ) | |||||
| Cash and cash equivalents - Beginning of period | 7,838 | 14,512 | ||||||
| Cash and cash equivalents - End of period | 9,182 | 11,357 |
accompanying notes are an integral part of these condensed interim consolidated financial statements.
| Aeterna Zentaris Inc. |
| Notes to Condensed Interim Consolidated Financial Statements (Unaudited) |
| As at March 31, 2019 and for the three months ended March 31, 2020 and 2019 |
| (amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) |
Zentaris Inc. ("Aeterna Zentaris" or 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 (the "License
Agreement") to Novo Nordisk A/S ("Novo") (note 5). As at March 31, 2020, the Company had an accumulated deficit
of $315 million. The Company also had net income of $779 for the three months ended March 31, 2020, and negative cash flow from
operations of $2,444 in this period.
has evaluated whether material uncertainties exist relating to events or conditions that may cast substantial doubt about the
Company's ability to continue as a going concern and has considered the following in making that critical judgment.
ability of the Company to realize its assets and meet its obligations as they come due is dependent on earning sufficient revenues
under the License Agreement, developing opportunities for Macrilen (macimorelin) in the rest of the world, realizing other
monetizing transactions, and raising additional sources of funding, the outcome of which cannot be predicted at this time. The
revenue provided under the License Agreement was $14 for the three months ended March 31, 2020 and as at March 31, 2020, the Company
had cash of $9,182. On February 21, 2020, the Company closed an equity financing for $3,900 in net cash proceeds.
significant portion of the Company's cash is held in Aeterna Zentaris GmbH ("AEZS Germany"), the Company's
principle operating subsidiary. AEZS Germany is the counter-party to the License Agreement, which is expected to generate future
revenue. 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 exceeds 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. This imposes additional and material uncertainties on the Company when evaluating
liquidity and the going concern assumption.
Company has some discretion to manage its planned research and development costs, administrative expenses and capital expenditures
in order to manage its cash liquidity, particularly in AEZS Germany. Furthermore, AEZS Germany is focused on opportunities to
either license or sell the European or worldwide rights to Macrilen (macimorelin) to third parties. As of the date of issuance
of these consolidated financial statements, there are no assurances that cash will be generated from such arrangements. Management
may also need to consider other sources of financing in order to continue its planned operations.
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 our supply
chain. For example, the COVID-19 outbreak may delay enrollment in our pediatric clinical trial due to prioritization of hospital
resources toward the outbreak, and some patients may be unwilling to enroll 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 spread of an infectious disease, including COVID-19, may also result in the inability 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. Such events may result in a period of business disruption
and, in reduced operations, doctors or medical providers may be unwilling to participate in our clinical trials, any of which
could materially affect our business, financial condition or results of operations.
| Aeterna Zentaris Inc. |
| Notes to Condensed Interim Consolidated Financial Statements (Unaudited) |
| As at March 31, 2020 and for the three months ended March 31, 2020 and 2019 |
| (amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) |
has assessed the Company's ability to continue as a going concern and concluded that additional capital will be required.
There can be no assurance that the Company will be able to execute license or purchase agreements or to obtain equity or debt
financing, or on terms acceptable to it. Factors within and outside the Company's control could have a significant bearing
on its ability to obtain additional financing. As a result, management has determined that there are material uncertainties that
may cast substantial doubt upon the Company's ability to continue as a going concern.
unaudited condensed interim consolidated financial statements have been prepared on a going concern basis, which asserts the Company
has the ability in the near term to continue to realize its assets and discharge its liabilities and commitments in a planned
manner giving consideration to the above and expected possible outcomes. Conversely, if the going concern assumption is not appropriate,
adjustments to the carrying amounts of the Company's assets, liabilities, revenues, expenses and balance sheet classifications
may be necessary, and these adjustments could be material.
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 U.S. through a license and assignment agreement (the "License
Agreement") with 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 (see COVID-19 impacts in note 1).
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 (as defined below), Novo is funding 70% of the pediatric clinical
trial submitted to the EMA and FDA, the Company's sole development activity (see COVID-19 impacts in note 1). In November
2019, Novo contracted AEZS Germany, our wholly owned German subsidiary, to provide supply chain services for the manufacture of
Macrilen (macimorelin).
| Aeterna Zentaris Inc. |
| Notes to Condensed Interim Consolidated Financial Statements (Unaudited) |
| As at March 31, 2020 and for the three months ended March 31, 2020 and 2019 |
| (amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) |
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.
accounting policies in these condensed interim consolidated financial statements are consistent with those presented in the Company's
annual consolidated financial statements.