Management s Discussion and Analysis of Financial Condition and Results of Operations Highlights Perifosine

Management s Discussion and

Analysis of Financial Condition and Results of Operations

June 1, 2009: Positive Phase 2 data on perifosine in advanced

metastatic colon cancer and in advanced renal cell carcinoma were presented at

the American Society of Clinical Oncology s ( ASCO ) annual meeting. The data

demonstrated perifosine s anti-cancer activity and efficacy both as a single

agent and in combination therapy. Data were generated by our North American

partner, Keryx Biopharmaceuticals ( Keryx ).

August 3, 2009: An agreement was reached with the United States

Food and Drug Administration ( FDA ) regarding a Special Protocol Assessment ( SPA )

on the design of a double-blind, placebo-controlled Phase 3 trial with

perifosine in relapsed or relapsed/refractory multiple myeloma patients

previously treated with bortezomib (Velcade ). The Phase 3 trial is to be conducted by Keryx.

September 16, 2009: Perifosine was granted Orphan Drug designation

from the FDA for the treatment of multiple myeloma.

Perifosine was granted Fast Track designation by the FDA for the treatment of

relapsed/refractory multiple myeloma.

Updated positive Phase 2 efficacy and safety data, as well as new survival data

for perifosine in combination with bortezomib (Velcade ) (+/- dexamethasone) in patients with

relapsed/refractory multiple myeloma, were presented at the American Society of

Hematology s ( ASH ) annual meeting. Results showed that the overall response

rate was 41% and median overall survival was reported at 25 months for all

evaluable patients. The combination therapy maintained an acceptable safety

profile and no unexpected adverse events were reported. Data were presented by

December 16, 2009: The

Phase 3 registration clinical trial with perifosine in relapsed/refractory

multiple myeloma was initiated by Keryx.

May 31, 2009: Presentation at the ASCO s Annual Meeting of results

supporting the evaluation of AEZS-108 in prostate cancer.

Disclosure of positive preliminary results for the Phase 2 study with AEZS-108

in patients with platinum-resistant and taxane-pretreated ovarian cancer.

Disclosure of positive efficacy data from a Phase 2 study with AEZS-108 in

patients with advanced or recurrent endometrial cancer.

September 21, 2009: Disclosure of results from a

Phase 1 study with AEZS-112 in patients with advanced solid tumors or lymphoma. Results showed prolonged courses of stable disease,

excellent tolerability and potential for long-term use as a combination

treatment for cancer.

June 11, 2009: Poster presentation on AEZS-130 (SolorelTM) at the annual meeting of the Endocrine Society,

reporting the first clinical data

relating to the use of AEZS-130 (SolorelTM) as a simple diagnostic test for adult growth hormone

August 17, 2009: Disclosure of results from two Phase 3 studies with cetrorelix in benign prostatic hyperplasia ( BPH ). The efficacy study

Z-033 (mainly conducted in North America) did not achieve its primary

endpoint. Results from the safety study Z-041 were positive and exhibited a

similar level of efficacy as the previously disclosed Phase 2 studies.

Disclosure of Phase 3 results for our European efficacy trial Z-036 in BPH with

cetrorelix. The study did not reach its primary endpoint.

Corporate Developments

June 23, 2009: Completion of a registered direct offering of

US$10.0 million to certain U.S. institutional investors.

Completion of a US$5.5 million registered direct offering with U.S.

institutional investors.

Appointment of Pierre Lapalme to our Board of Directors.

Development, Commercialization and License Agreement

March 4, 2009: Announcement of a development, commercialization and

licensing agreement with sanofi-aventis U.S. LLC ( sanofi ) for the

development, registration and marketing of cetrorelix in BPH for the U.S.

market. The agreement provided us with a $30.0 million gross upfront

Announcement of the termination of our agreement with sanofi for the

development, commercialization and licensing of cetrorelix in BPH for the U.S.

market, subsequent to negative Phase 3 results.

Subsequent to Year-End

January 22, 2010: Notification from NASDAQ

indicating that we were not in compliance with the minimum closing bid price

January 25, 2010: Updated results of a

Phase 2 study of perifosine in the treatment of advanced metastatic colon

cancer showing a statistically significant benefit in survival, were reported

January 27, 2010: Our partner, Spectrum

Pharmaceuticals, Inc. ( Spectrum ) announced the discontinuation of its

development program for ozarelix in BPH.

January 29, 2010: A publication in the February 2010

issue of the Journal of Clinical Cancer Research

reported positive Phase 2 results for perifosine as a single agent for the

treatment of advanced Waldenstrom s macroglobulinemia.

February 3, 2010: The FDA granted a SPA

for the Phase 3 trial of perifosine in combination with capecitabine (Xeloda ) in refractory metastatic colorectal cancer. The

trial is to be conducted by Keryx.

March 1, 2010: Disclosure that the

Committee for Orphan Medicinal Products of the European Medicines Agency issued

a positive opinion for orphan medicinal product designation for perifosine for

the treatment of multiple myeloma.

March 12, 2010: We filed a Canadian

short-form base shelf prospectus, as well as a registration statement on Form F-3

with the United States Securities and Exchange Commission ( SEC ), which were

declared effective by both the Canadian authorities and the SEC, and which

would permit us to issue up to $60.0 million of freely tradeable common

shares and warrants to purchase common shares.

The following Management s Discussion and Analysis ( MD&A ) provides a

review of the results of operations, financial condition and cash flows of

terna Zentaris Inc. for the year ended December 31, 2009. In this MD&A, the Company , we , us ,

and our mean terna Zentaris Inc. and its subsidiaries. This

discussion should be read in conjunction with the information contained in the

Company s consolidated financial statements and related notes as at and for the

years ended December 31, 2009, 2008 and 2007. Our consolidated financial statements, reported in United States

dollars ( US dollars ), except where otherwise noted, have been prepared in

accordance with Canadian Generally Accepted Accounting Principles ( Canadian

GAAP ) for financial information, which differ in certain respects from United