Full Press Release Details
Management s Discussion and Analysis
of Financial Condition and
Results of Operations
Second Quarter MD&A 2012
Corporate developments
NASDAQ Delisting Notification
Share Consolidation (Reverse Stock Split)
At-The-Market Issuance Program ( ATM Program )
Second Quarter MD&A 2012
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 and
six-month periods ended June 30, 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 June 30, 2012 and for the three-month and six-month periods ended June 30, 2012 and 2011.
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
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.
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.
Second Quarter MD&A 2012
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.
The Company has incurred over the years recurrent operating losses, investing significantly in
its R&D activities as well as supporting its general and administrative expenses. It has financed its operations through different sources including the issuance of common shares and the conclusion of strategic alliances with licensee partners.
The Company expects to continue to incur operating losses and may require significant capital to fulfill its future obligations. See the capital disclosures and the liquidity risk sections below.
In oncology, we are advancing perifosine, our oral Akt/PI3K inhibitor, currently in a Phase 3 trial in multiple myeloma and in Phase 1/2 trials in
other cancer indications. We also 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, refractory bladder cancer and in triple-negative breast cancer.
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.
Second Quarter MD&A 2012
Key Developments for the Three Months Ended June 30, 2012
| Status of our drug pipeline as at August 14, 2012 | ||||||||||
| Discovery | Preclinical | Phase 1 | Phase 2 | Phase 3 | Commercial | |||||
| ~120,000 compound library | AEZS-120 Prostate cancer vaccine (oncology) AEZS-136 PI3K/Erk inhibitor (oncology) AEZS-137 (disorazol Z) (oncology) AEZS-125 (LHRH- disorazol Z) (oncology) | AEZS-112 (oncology) | AEZS-108 Endometrial cancer Triple-negative breast cancer Ovarian cancer Castration- and taxane-resistant prostate cancer Refractory bladder cancer Ozarelix Prostate cancer AEZS-130 Therapeutic in cancer cachexia Perifosine (Phase 1/2) Neuroblastoma Glioma Pediatric solid tumors | Perifosine Multiple myeloma AEZS-130 Diagnostic in adult growth hormone deficiency (endocrinology) | Cetrotide ( in vitro fertilization) |
Second Quarter MD&A 2012
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 active pharmaceutical ingredients ( API ), clinical samples, as well as 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).
On May 31, 2012, we announced that an article had been published in the May 2012 issue of PLoS ONE, outlining a novel mechanism of
action of perifosine which could provide a rationale for a novel approach to the treatment of Malignant Pleural Mesothelioma (MMe), an aggressive type of cancer associated with exposure to asbestos. The article, entitled, Perifosine as a
Potential Novel Anti-Cancer Agent Inhibits EGFR/MET-AKT Axis in Malignant Pleural Mesothelioma , G. Pinton, A. Gabriella Manente, G. Angeli, L. Mutti and L. Moro, referred to data demonstrating that perifosine
caused a dose-dependent reduction of Akt activation at concentrations causing MMe cell growth arrest. Moreover, the article described a novel mechanism of perifosine that interferes, upstream of Akt, affecting EGFR and MET phosphorylation. Finally,
the article indicated that the data demonstrated a significant increase in cell toxicity when MMe cells were treated with perifosine in combination with cisplatin.
On June 4, 2012, we announced that Johanna Bendell, MD, Director of Gastrointestinal Cancer Research and Associate Director of Drug Development at the Sarah Cannon Research Institute in Nashville,
Tennessee, had presented Phase 3 results for perifosine in refractory CRC at the ASCO Annual Meeting in Chicago. Dr. Bendell was the lead investigator of the trial. The data showed no benefit in overall survival when adding perifosine to
capecitabine in the refractory CRC setting, confirming top-line results which we had previously disclosed on April 2, 2012. For the total intent to treat (ITT) patient population, median overall survival ( OS ) was 6.9 months for
the CAP group compared to 6.4 months for the P-CAP group. Median progression-free survival ( PFS ) was 11.4 weeks for the CAP group compared to 10.9 weeks for the P-CAP group. The differences were not statistically
significant. There were 7 complete and partial responses in the CAP group compared to 6 complete and partial responses in the P-CAP group. There was no significant difference in toxicity profiles between the two arms. The most frequent hematologic
adverse event was grade 1/2 anemia (CAP = 30 vs. P-CAP = 49). The most common non-hematologic adverse event was grade 1/2 fatigue (CAP = 95 vs. P-CAP = 125). In one pre-defined subgroup to which patients were stratified, those who expressed the
wild-type K-ras proto-oncogene and who had discontinued oxaliplatin for toxicity rather than for disease progression (n=86), there was a benefit in OS (P-CAP = 8 months versus CAP = 6.2 months) and in PFS (P-CAP = 18.1 weeks versus CAP =
6.6 weeks) for perifosine treated patients. The reason for this finding is not clear at present and biomarker analyses are ongoing.
Second Quarter MD&A 2012
On June 5, 2012, we announced that Phase 1 trial results for perifosine in multiple myeloma,
previously presented at the 2010 American Society of Hematology Annual Meeting and Exposition, had been published in the online May 2012 issue of the British Journal of Haematology. The article outlined the safety profile and encouraging
clinical activity of perifosine when combined with lenalidomide and dexamethasone in relapsed and relapsed/refractory multiple myeloma. Among 30 evaluable patients for efficacy, 73% achieved a minimal response or better, including 50% with a partial
response or better. Median PFS was 10.8 months and median OS was 30.6 months. Among the 31 evaluable patients for safety and tolerability, the most common all-causality grade 1-2 adverse events were fatigue (48%) and diarrhea
(45%), and grade 3-4 adverse events were neutropenia (26%), hypophosphataemia (23%), thrombocytopenia (16%) and leucopenia (13%). No grade 3-4 peripheral neuropathies or deep vein thromboses were reported. Exploratory pharmacodynamic study data
suggest that the clinical efficacy of perifosine + lenalidomide + dexamethasone is positively associated with phospho-Akt; the activity of the 3-drug combination appeared to be greater in patients with higher baseline phospho-Akt. The data also
suggest that perifosine may be particularly effective in patients with Akt-dependent multiple myeloma, a subgroup of multiple myeloma (Zollinger et al, 2008).
On June 18, 2012, we announced that data from two single-arm, open-label Phase 2 trials (#228 and #231) in RCC for perifosine had been published in the June 2012 issue of Cancer, a publication of the
American Cancer Society. The article, entitled Two Phase 2 Trials of the Novel Akt Inhibitor Perifosine in Patients with Advanced Renal Cell Carcinoma After Progression on Vascular Endothelial Growth Factor-Targeted Therapy ,
D.C. Cho, T.E. Hutson, W. Samlowski, P. Sportelli, B. Somer, P. Richards, J.A. Sosman, I. Puzanov, M.D. Michaelson, K.T. Flaherty, R.A. Figlin and N.J. Vogelzang, outlined perifosine s
activity as monotherapy in patients with advanced RCC, which was comparable to current second-line agents. Both objective tumor responses and prolonged disease stability were observed, and perifosine was well tolerated at the 100mg daily dose used
in this trial. In the #228 trial, 24 patients with advanced RCC received oral perifosine (100mg daily). The #231 trial enrolled 2 groups that received daily oral perifosine (100mg daily): Group A comprised 32 patients who had received no prior mTOR
inhibitor, and Group B comprised 18 patients who had received 1 prior mTOR inhibitor. In the #228 trial, 1 patient achieved a partial response and 11 patients had stable disease as their best response. The median progression-free survival was
14.2 weeks. In the #231 trial, 5 patients achieved a partial response and 16 patients had stable disease as their best response. The median progression-free survival was 14 weeks both in patients with and without prior mTOR inhibitor
therapy. Overall, there were very few grade 3 and 4 events, therefore, demonstrating perifosine s single-agent activity being similar to known drugs. The most common toxicities included nausea, diarrhea, musculoskeletal pain and fatigue.
Finally, the authors concluded that this compound may be worthy of further investigation in this indication in combination with available therapies.
On June 21, 2012, we announced that results from an open-label, dose-escalating Phase 1 trial for perifosine showed the drug s activity against chemo-resistant and radio-resistant neuroblastoma,
while allowing good quality of life and sparing vital organs. The data were presented by Brian H. Kushner, MD, of the Memorial Sloan-Kettering Cancer Center in New York, during a poster session at the Advances in Neuroblastoma Research Conference
held in Toronto. Data were based on 24 treated patients who were dosed using 50mg tablets and received a loading dose (100-200mg/m2) of perifosine on day 1, followed by daily maintenance doses (50-75mg/m2) until progressive disease or dose-limiting toxicity. Disease
evaluation was every 8 weeks. Antineuroblastoma activity was evident by a 50% PFS rate at 12 months (Standard Error 11%) and included 1 complete remission (CR) based on a normalized MIBG scan and 3 patients with improved MIBG scan
and normalized bone marrow histology over prolonged follow-up (up to 37+months). No significant toxicity was seen, in particular no grade 3 problems, and no safety issues were encountered in 6 patients who started treatment with pre-existing
thrombocytopenia and/or grade 3 elevations in liver enzymes. These results indicate that further development of perifosine in neuroblastoma is warranted.
On June 28, 2012, we announced that our Japanese partner, Yakult (Tokyo: 2267), had initiated a Phase 1 trial in multiple myeloma with perifosine. Yakult, who is sponsoring and conducting this
trial in Japan, reported that a first patient has been treated with perifosine. This is an open-label, two-step Phase 1 trial in which perifosine is combined with bortezomib (Velcade ) and dexamethasone in patients with refractory multiple myeloma who had previously been treated with bortezomib. The trial is expected to include a total of 18
patients (6 in step 1 and 12 in step 2). Patients will receive perifosine daily (50mg, Days 1-21) in combination with bortezomib (1.3mg/m2, Days 1, 4, 8 and 11) and dexamethasone (20mg, Days 1, 2, 4, 5, 8, 9, 11 and 12) according to a three-week
cycle (21 days 3 days). The primary endpoint is safety, and secondary endpoints include response rate, progression-free survival and time to tumor progression.
Second Quarter MD&A 2012