First Quarter 2012 Management s Discussion and Analysis of Financial Condition and Results of Operations Highlights AEZS-108 We announced a collaboration agreement with Ventana Medical Systems, Inc. ( Ventana ), a member

Management s Discussion and Analysis

of Financial Condition and

Results of Operations

First Quarter MD&A 2012

Corporate developments

At-The-Market Issuance Program

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, 2012. 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 interim consolidated financial statements as at March 31, 2012 and for the three-month periods ended March 31,

All amounts in this MD&A are presented in US dollars, except for share, option and warrant data, per share and per warrant

data and as otherwise noted.

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 United States Food and Drug Administration ( 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 2012

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 reasonably would 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

strategic collaborators and licensee partners to contribute to the development of our pipeline of product candidates and to establish commercial activities in specific territories.

In oncology, we plan to initiate a pivotal program with AEZS-108, a doxorubicin 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 castration- and taxane-resistant prostate cancer and refractory bladder cancer, as well as initiating a Phase 2 trial in

triple-negative breast cancer. Furthermore, perifosine, our oral Akt/PI3K inhibitor, is currently in a Phase 3 trial in multiple myeloma and in Phase 2 in other cancer indications.

Our oncology pipeline also encompasses other earlier-stage programs. Among them, AEZS-112, an oral anticancer agent which involves three mechanisms of action (tubulin, topoisomerase II and angiogenesis

inhibition), 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-136, are currently in preclinical development.

In endocrinology, we are planning to file a New Drug Application

( NDA ) in the United States for the registration of AEZS-130, an oral ghrelin agonist, as a diagnostic test for adult growth hormone deficiency ( AGHD ). A Phase 3 trial under an FDA Special Protocol Assessment

( SPA ) has been completed in this indication. Furthermore, AEZS-130 is in a Phase 2A trial for the treatment of cancer cachexia.

First Quarter MD&A 2012

Key Developments for the Three Months Ended March 31, 2012

First Quarter MD&A 2012

On January 5, 2012, we announced that we had entered into an agreement, dated December 19, 2011, with Ventana to develop a companion diagnostic for the immunohistochemical determination of

LHRH-receptor expression, for AEZS-108.

On February 3, 2012, we reported updated results for the Phase 1 portion of our ongoing

Phase 2 study in CRPC with AEZS-108. This is a single-arm study with a Phase 1 lead-in portion (testing 3 dose levels) to a Phase 2 clinical trial. The primary endpoint of the Phase 1 portion is safety. The primary objective of

the Phase 2 portion is to evaluate the clinical benefit of AEZS-108 for these patients. Data were presented by Jacek Pinski, M.D., Ph.D., Associate Professor of Medicine at the Norris Comprehensive Cancer Center of the University of

Southern California, during a poster session at the ASCO GCS in San Francisco. The trial is being supported by a three-year $1.6 million grant from the National Institutes of Health ( NIH ) to Dr. Pinski.

The results were based on 13 patients who have been previously treated with androgen-deprivation therapy (LHRH agonist) and at least

one taxane-based chemotheraphy regiment, who have been treated on 3 dose levels of AEZS-108: 3 at

160 mg/m2, 3 at 210 mg/m2, and 7 at 267 mg/m2. Overall, AEZS-108 has been well tolerated among this group of

heavily pre-treated older patients. There have been 2 dose-limiting toxicities, each of which having been cases of asymptomatic Grade 4 neutropenia at the 267 mg/m2 dose level and both patients fully recovered. The Grade 3 and 4 toxicities were primarily hematologic. There has been

minimal non-hematologic toxicity, most frequently fatigue and alopecia.

Despite the low doses of AEZS-108 in the first

cohorts, there was some evidence of antitumor activity. One patient received 8 cycles (at 210 mg/m2) due to continued benefit. Among the 5 evaluable patients with measurable disease, 4 achieved stable disease. At the time of submission of the abstract, a decrease in PSA was noted in 6 patients. Six of

13 (46%) treated patients have received at least 5 cycles of therapy with no evidence of disease progression at 12 weeks. Correlative studies on circulating tumor cells ( CTC ) have demonstrated the uptake of AEZS-108 into the

targeted tumor. After completion of 3 additional patients at the 210 mg/m2 dose level, the study is expected to be extended into the Phase 2 portion.

On March 8, 2012, we announced that the Michael E. DeBakey Veterans Affairs Medical Center, in Houston, Texas, initiated a

Phase 2A trial assessing the safety and efficacy of repeated doses of AEZS-130 in patients with cancer cachexia. The study is conducted under a Cooperative Research and Development Agreement ( CRADA ) with the Michael E. DeBakey

Veterans Affairs Medical Center, which is funding the study. This is a double-blind, randomized, placebo-controlled Phase 2A trial to test the effects of different doses of AEZS-130 in 18 to 26 patients with cancer cachexia. AEZS-130 will be

provided by us. The study will involve 3 sequential groups receiving differing doses of AEZS-130. Each dose group will have 6 patients who will receive AEZS-130 and 2-4 patients who will receive a placebo. The primary objective of the study is to

evaluate the safety and efficacy of repeated oral administration of AEZS-130 at different doses daily for 1 week in view of developing a treatment for cachexia.

First Quarter MD&A 2012

On January 3, 2012, we announced that our Japanese partner, Yakult, had initiated a Phase 1/2 trial in Japan to assess the safety and efficacy of perifosine in combination with chemotherapeutic

agent, capecitabine, in patients with refractory advanced CRC. The primary endpoint of the Phase 1 portion of the trial is the safety profile of perifosine in combination with capecitabine. The primary endpoint of the Phase 2 portion is efficacy

(Disease Control Rate). This trial is sponsored by Yakult and its initiation on December 27, 2011 triggered a 2 million milestone payment which we received during the first quarter of 2012.

On March 26, 2012, we announced the presentation of a poster entitled, Perifosine alone and in combination with anti-metabolites interferes

with NF-kB pathway activation in colon cancer cell lines , which was held at the AACR meeting at the McCormick Place in Chicago.

Corporate Developments

January 2012 ATM Program

January 23, 2012, pursuant to our existing ATM sales agreement dated June 29, 2011, with MLV, we initiated our January 2012 ATM Program under which we may, at our discretion, from time to time during the term of the sales agreement, sell

up to a maximum of 10.4 million of our common shares through ATM issuances on NASDAQ up to an aggregate amount of $16.0 million.

Between January 23, 2012 and March 15, 2012, we issued a total of 3.6 million common shares under the January 2012 ATM Program for

aggregate gross proceeds of $6.4 million, less cash transaction costs of $0.2 million and previously deferred transaction costs of $56,000.

Subsequent to quarter-end

On April 2, 2012, we announced top line Phase 3 results for perifosine in CRC. The Phase 3 X-PECT (Xeloda + Perifosine Evaluation in Colorectal Cancer Treatment) clinical trial evaluating perifosine + capecitabine (Xeloda ) in patients with refractory advanced CRC did not meet the primary endpoint of improving overall survival versus

capecitabine + placebo. The trial involving 468 patients in 65 sites in the U.S was conducted by the Company s North American licensee partner, Keryx.

On May 7, 2012, we announced that we had agreed with Keryx to terminate our license agreement with respect to perifosine, as a result of which Aeterna Zentaris regained in full the North American

rights to perifosine, in all indications. We also announced that we will continue the ongoing Phase 3 trial in multiple myeloma with this compound. Termination of the agreement was effective as of May 4, 2012. Under the terms of the

agreement to terminate, all intellectual property and development data, including orphan drug designations and Investigational New Drug ( INDs ) applications on perifosine generated by Keryx, have been transferred to Aeterna Zentaris. In

return, we agreed to pay low single-digit royalties to Keryx on future net sales of perifosine in North America (U.S., Canada and Mexico).

January 2012 ATM Program

April 2, 2012 and May 8, 2012, we issued a total of 2.5 million common shares under the January 2012 ATM Program for aggregate gross proceeds of $1.8 million, less cash transactions costs of $55,160 and previously deferred

transaction costs of $25,300.

First Quarter MD&A 2012

Interim Consolidated Statements of Comprehensive Loss Information

First Quarter MD&A 2012

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. 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 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 $8.3 million

for the three-month period ended March 31, 2012, compared to $7.1 million for the same period in 2011. This increase is largely attributable to comparative higher deliveries of Cetrotide to certain customers, which in turn is partly offset by the relative weakening of the euro against the US dollar.