Second Quarter 2015 Management's Discussion and Analysis of Financial Condition and Results of Operations Company Overview Aeterna Zentaris Inc. is a specialty biopharmaceutical company engaged in developing and commerci

Management's Discussion and Analysis

of Financial Condition and Results of Operations

Aeterna Zentaris Inc. is a specialty biopharmaceutical company engaged in developing and commercializing novel treatments in oncology, endocrinology and women's health.

Our drug development efforts are focused currently on two lead, clinical-stage development compounds: zoptarelin doxorubicin, which has the potential to become the first United States ("US") Food and Drug Administration ("FDA")-approved medical therapy for advanced, recurrent endometrial cancer, and Macrilen , a novel orally-active ghrelin agonist for use in evaluating adult growth hormone deficiency ("AGHD"). Additionally, our Erk inhibitors and luteinizing hormone releasing hormone ("LHRH")-Disorazol Z compounds, potential oncology-indication product candidates, are in pre-clinical development.

We also continue to work concurrently to pursue strategic commercial initiatives in connection with our goal to become a commercially operating specialty biopharmaceutical organization. Our vision includes in-licensing, acquiring, promoting or co-promoting additional appropriate commercial products, as well as optimizing the ultimate launch of our potential product candidates (i.e. Macrilen and zoptarelin doxorubicin) in certain strategic territories, including the US, Canada and the European Union, where we already have business activities. We also intend to license out certain commercial rights to licensees in territories where such out-licensing would enable the Company to ensure development, registration and launch of our product candidates.

The Company's common shares are listed on both the NASDAQ Capital Market ("NASDAQ"), under the symbol "AEZS", and on the Toronto Stock Exchange ("TSX"), under the symbol "AEZ".

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, 2015. 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 condensed interim consolidated financial statements and the accompanying notes thereto as at June 30, 2015 and for the three-month and six-month periods ended June 30, 2015 and 2014 (the "condensed interim consolidated financial statements"). Our condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting.

All amounts in this MD&A are presented in US dollars, except for share, option and 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", "assume", "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 and others of which are discussed under the caption "Key Information - Risk Factors" in our most recent Annual Report on Form 20-F filed with the relevant Canadian securities regulatory authorities in lieu of an annual information form and with the US Securities and Exchange Commission ("SEC"). Such statements include, but are not limited to, statements about the progress of our research, development and clinical trials and the timing of, and prospects for, regulatory approval and commercialization of our product candidates, the

Second Quarter MD&A - 2015

timing of expected results of our studies, anticipated results of these studies, statements about the status of our efforts to establish a commercial operation and to obtain the right to promote or sell products that we did not develop and estimates regarding our capital requirements and our needs for, and our ability to obtain, additional financing. Known and unknown risks and uncertainties could cause our actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the availability of funds and resources to pursue our research and development ("R&D") projects, the successful and timely completion of clinical studies, the degree of market acceptance once our products are approved for commercialization, our ability to take advantage of business opportunities in the pharmaceutical industry, our ability to protect our intellectual property, uncertainties related to the regulatory process and general changes in economic conditions. See also the section entitled "Risk Factors and Uncertainties" in this MD&A.

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 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 our securities are registered with the SEC. The Company is therefore required to file or furnish continuous disclosure information, such as interim and annual financial statements, MD&A, proxy or information 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.

Status of Our Drug Pipeline

(1) Phase 2 in ovarian cancer completed.

(2) Investigator-driven and sponsored.

(3) Potential oral prostate cancer vaccine available for co-development/out-licensing.

(4) Available for co-development/out-licensing.

(5) Compound library transferred to The Medical University of South Carolina ("MUSC"). We have access to future potential development candidates.

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Zoptarelin Doxorubicin

Zoptarelin doxorubicin is a complex molecule that combines a synthetic peptide carrier with doxorubicin, a well-known chemotherapy agent. The synthetic peptide carrier is an LHRH agonist, a modified natural hormone with affinity for the LHRH receptor. The design of the compound allows for the specific binding and selective uptake of the cytotoxic conjugate by LHRH receptor-positive tumors. Potential benefits of this targeted approach include a better efficacy and a more favorable safety profile with lower incidence and severity of side effects as compared to doxorubicin alone.

We believe that zoptarelin doxorubicin has the potential to become the first FDA-approved medical therapy for advanced, recurrent endometrial cancer, potentially resulting in the compound's rapid adoption as a novel core therapy for patient treatment and management, representing a significant potential market opportunity for the Company. Moving forward, we will continue to develop our commercialization plans regarding zoptarelin doxorubicin in this indication. In addition, contingent on the success of the ZoptEC (Zoptarelin Doxorubicin in Endometrial Cancer) Phase 3 clinical trial, we have additional areas of interest for further therapeutic development, including ovarian, prostate, triple negative breast cancer and potentially bladder cancer.

On April 16, 2015, we announced that we had filed an application for a European patent on a novel method of manufacturing zoptarelin doxorubicin. Because this compound is a complex molecule, it is expensive to synthesize, and the requested patent, if granted, may make it difficult for generic manufacturers to produce zoptarelin doxorubicin on a financially feasible basis once our composition of matter patent on the compound expires. Further, the claimed manufacturing process is expected to result in a significant reduction in cost of goods sold, providing a stronger competitive position for the Company.

On April 27, 2015, we announced that an independent Data and Safety Monitoring Board ("DSMB") for the pivotal Phase 3 ZoptEC clinical trial with zoptarelin doxorubicin in women with advanced, recurrent or metastatic endometrial cancer had completed a pre-specified first interim futility analysis (after 128 events). The DSMB recommended that the Phase 3 clinical trial continue as planned.

On June 30, 2015, we announced that we had reached our goal of completing enrollment of 500 patients for the Phase 3 ZoptEC clinical trial.

Macrilen (macimorelin)

On April 13, 2015, we announced plans to conduct a new confirmatory Phase 3 clinical trial to demonstrate the efficacy of Macrilen , as well as a dedicated thorough QT study to evaluate the effect of Macrilen on myocardial repolarization. During an end-of-review meeting with the FDA on March 6, 2015, we and the FDA agreed on the general design of the confirmatory Phase 3 clinical trial of Macrilen , as well as on evaluation criteria. The clinical trial, which was recently initiated, will be conducted as a two-way crossover with the insulin tolerance test as the benchmark comparator. The clinical trial population will consist of patients with a medical history documenting risk factors for AGHD and will include a spectrum of patients from those with a low risk of having AGHD to those with a high risk of having the condition. Our goal is to initiate the QT study at the beginning of 2016. We currently estimate that it will take approximately 18 months to complete the trials, with a combined expenditure of between $6 million and $7 million over that period.

On May 26, 2015, we announced that we had received written scientific advice from the European Medicines Agency ("EMA") regarding the further development plan, including the study design, for the new confirmatory Phase 3 clinical trial of Macrilen , following a Scientific Advice Meeting that had been held earlier that month. As a result of the advice, we believe that the confirmatory Phase 3 clinical trial that was discussed with the FDA last March meets the EMA's study-design expectations.

On June 25, 2015, we announced that we had entered into an agreement with Ergomed PLC (formerly Ergomed Clinical Research Limited, hereafter referred to as "Ergomed"), pursuant to which Ergomed will manage the new confirmatory Phase 3 clinical trial of Macrilen . Ergomed is already the clinical research organization supporting our pivotal Phase 3 ZoptEC clinical trial.

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Pre-clinical developments

As for our compounds in earlier stages of development, and as part of our resource optimization program implemented in 2014, we have decided to streamline our drug discovery activities and focus on specific projects related to our Erk inhibitors and our LHRH-disorazol Z product candidates.

On July 28, 2015, we announced that we had granted to German life sciences entrepreneurs with a proven track-record of funding the development and commercialization of biotechnology (the "Optionee"), an option to license our live recombinant allogenic oral cancer vaccine technology (the "Technology"), including AEZS-120, the most advanced product candidate for prostate cancer which is ready to enter into a Phase 1 clinical trial. This option was granted to the Optionee worldwide, for a period of twelve months, in exchange for an upfront fee. Pursuant to the option agreement, the Optionee has the right to obtain a worldwide exclusive license to develop, use and sell products relating to the Technology and AEZS-120, in exchange for milestone payments and royalties on net sales of any product developed from the Technology and an equity interest in the company formed to develop the Technology. At the present time, we hold worldwide rights to the Technology, including AEZS-120.

On July 29, 2015, we announced that we had selected an optimized Erk inhibitor molecule, AEZS-140 and back-up candidates, for development, thus achieving another important milestone in the development of a new class of potential cancer therapies. AEZS-140 and the back-up candidates have demonstrated improved plasma exposure in rodents as well as enhanced anti-tumor efficacy in comparison to our previous lead compound, AEZS-134. Furthermore, AEZS-140 was profiled against several clinical Raf, Mek and Erk inhibitors and demonstrated very competitive activity. We will proceed with the next development steps for AEZS-140 and the back-up compounds, including in depth profiling in vitro and, also, further in vivo tumor models. We are seeking proposals from parties who are interested in either co-developing or licensing the compounds.

Commercial Developments

During the quarter, we continued our promotional efforts related to our agreement with ASCEND Therapeutics US LLC ("ASCEND") to detail EstroGel , a leading non-patch transdermal hormone replacement therapy product, in specific agreed-upon US territories in exchange for commissions revenue that is based upon incremental sales of the product that are generated over pre-established baselines.

On May 8, 2015, we announced that we had entered into a promotional services agreement with EMD Serono, Inc., the US and Canadian biopharmaceutical businesses of Merck KGaA of Darmstadt, Germany ("EMD Serono"), allowing us to promote Saizen [somatropin (rDNA origin) for injection] to designated medical professionals in specified US territories. Saizen is a recombinant human growth hormone registered in the US for the treatment of growth hormone deficiency in children and adults. Under this agreement, we are detailing Saizen to designated medical professionals, representing an important incremental field promotion activity in support of the EMD Serono's product. Payment to Aeterna Zentaris is based on new, eligible patient starts on Saizen above an agreed-upon baseline.

On July 27, 2015, we announced that our contractual sales force had started promoting Saizen in 25 territories in the United States, pursuant to the above-mentioned agreement with EMD Serono. This represents an expansion of 6 territories to our existing structure.

Our commercial operations consist of a full-time sales force and a sales-management staff. We currently have 19 sales representatives in the US, which will be expanding to 25, all of whom provide and will provide services pursuant to our agreement with a contract sales organization.

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Corporate Developments

Subsequent to quarter-end, we terminated our lease arrangement for laboratory, office and storage space in Germany and entered into a new lease agreement for the rental of less space on the same premises. The new lease will enable us to save an estimated $0.5 million per year commencing in 2016 and through the expiry of the lease term, which is April 30, 2021.

In connection with the public offering completed in March 2015 (the "March 2015 Offering"), between March 23, 2015 and June 16, 2015, all of the pre-funded Series C Warrants were exercised, resulting in the issuance of a total of approximately 34.6 million common shares. Additionally, between June 1, 2015 and June 30, 2015, approximately 3.0 million of the Series B Warrants were exercised on an alternate cashless basis, resulting in the issuance of approximately 14.4 million common shares.

Subsequent to quarter-end, between July 1, 2015 and August 12, 2015, we issued a total of approximately 42.4 million common shares pursuant to the exercise of approximately 5.9 million Series B Warrants on an alternate cashless basis.

Minimum Bid Price Rule

On June 18, 2015, we announced that we had received a notice from the NASDAQ Listing Qualifications Department determining that the Company is eligible for an additional 180 calendar day period, until December 14, 2015, to regain compliance with the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2). Our shares continue to trade on the NASDAQ under the symbol AEZS.

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Condensed Interim Consolidated Statements of Comprehensive Loss Information

Second Quarter MD&A - 2015

Revenues recorded during the three-month and six-month periods ended June 30, 2015 resulted primarily from the amortization of a one-time, non-refundable payment made to us in December 2014 in connection with a master collaboration agreement, a technology transfer and technical assistance agreement and a license agreement we entered into with Sinopharm A-Think Pharmaceuticals Co., Ltd. ("Sinopharm") related to zoptarelin doxorubicin. In addition, we began generating commissions revenue in connection with our co-promotion efforts related to EstroGel , pursuant to the co-promotion services agreement entered into with ASCEND.

We expect revenues during the second half of 2015 to be higher than those recorded during the first half of 2015 due to the recording of higher commissions revenue associated with our promotional efforts related to EstroGel and Saizen .

R&D costs were $4.5 million and $8.9 million for the three-month and six-month periods ended June 30, 2015, respectively, compared to $5.5 million and $11.3 million for the same periods in 2014.

The decrease for the three-month and six-month periods ended June 30, 2015, as compared to the same periods in 2014, is attributable to lower comparative employee compensation and benefits costs, facilities rent and maintenance as well as other costs. A substantial portion of this decrease is due to the realization of cost savings in connection with our global resource optimization program as well as to the weakening, in 2015, of the EUR against the US dollar, which has appreciated on average by approximately 22.6% from the six-month period ended June 30, 2014 to the same period in 2015. This decrease was partly compensated by higher third-party costs, as described below.

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

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* Includes depreciation, amortization, impairment charges, reversal of impairment charges and of unused provision as well as operating foreign exchange losses.

The following tables summarize primary third-party R&D costs, by product candidate, incurred by the Company during the three-month and six-month periods ended June 30, 2015 and 2014.

Second Quarter MD&A - 2015

As shown above, a substantial portion of the quarter-to-date and year-to-date third-party R&D costs relates to development initiatives associated with zoptarelin doxorubicin, and in particular with our Phase 3 ZoptEC clinical trial initiated in 2013 with Ergomed. Third-party costs attributable to zoptarelin doxorubicin increased by $0.3 million and $1.2 million during the three-month and six-month periods ended June 30, 2015, respectively, as compared to the same periods in 2014, mainly due to a higher comparative number of patients enrolled in the clinical trial. As noted above, this trial is now fully enrolled.

During the six-month period ended June 30, 2015, ongoing services provided by Ergomed included the conducting of monitoring visits at various clinical sites, screening and enrolment initiatives, investigation-related management and analysis as well as regulatory and quality assurance support. ZoptEC-related efforts are progressing in accordance with pre-established timelines. As we continue to closely monitor all initiatives supported by Ergomed, we may decide to revise some of the trial's parameters or expand the scope of work performed by Ergomed, and consequently, total estimated costs in connection with the co-development and revenue sharing agreement may be adjusted. To date, our arrangement with Ergomed has been revised following our decision to open additional clinical sites and to perform additional sub-studies, resulting in overall, cumulative cost increases of approximately $1.8 million, as compared to our original expectations. We currently estimate that we will incur approximately $8.8 million pursuant to our agreement with Ergomed over the next 18 months as we proceed with and complete our ZoptEC trial and assuming that upcoming second interim results justify continuing this study.

Excluding the impact of foreign exchange rate fluctuations, we expect R&D costs to increase in the second half of 2015, as compared to the first half of 2015, with the recent initiation of our confirmatory Phase 3 clinical trial for MacrilenTM. However, based on currently available information and forecasts, and excluding the impact of foreign exchange rate fluctuations, we continue to expect that we will incur overall R&D costs of between $21 million and $23 million for the year ended December 31, 2015.

General and administrative ("G&A") expenses were $2.0 million and $5.4 million for the three-month and six-month periods ended June 30, 2015, respectively, as compared to $2.5 million and $4.4 million for the same periods in 2014.

The comparative year-to-date increase is mainly attributable to transaction costs incurred in connection with the completion of the March 2015 Offering.

Excluding the impact of foreign exchange rate fluctuations, we expect G&A expenses to decrease in the second half of 2015, as compared to the first half of 2015, due to the recording in the first quarter of non-recurring transaction costs related to the March 2015 Offering. Based on currently available information and forecasts, excluding the impact of foreign exchange rate fluctuations, we now expect that our G&A expenses will increase for the year ended December 31, 2015, as compared to the year ended December 31, 2014, mainly due to the aforementioned recording of transaction costs in connection with the completion of the March 2015 Offering.

Selling expenses were $1.7 million and $3.4 million for the three-month and six-month periods ended June 30, 2015, respectively, as compared to $0.5 million and $0.9 million for the same periods in 2014.

The increase in selling expenses for the three-month and six-month periods ended June 30, 2015, as compared to the same periods in 2014, is mainly attributable to the implementation of our promotional activities associated with EstroGel in the last quarter of 2014. More specifically, during the three-month and six-month periods ended June 30, 2015, approximately $1.0 million and $2.0 million, respectively, of our selling expenses represented increased costs associated with our contracted sales force and our own sales and marketing staff.

Second Quarter MD&A - 2015

We expect selling expenses to increase slightly in the second half of 2015, as compared to the first half of 2015, mainly as we plan to expand the size of our contracted sales force from 19 to 25 sales representatives in order to support our promotional efforts associated with Saizen .

Net finance costs increased by $10.3 million and $14.3 million for the three-month and six-month periods ended June 30, 2015, as compared to the same periods in 2014. These increases are almost entirely attributable to the change in fair value of our warrant liability. Such change in fair value results from the periodic "mark-to-market" revaluation, via the application of the intrinsic valuation and the Black-Scholes option pricing models, of currently outstanding share purchase warrants. The "mark-to-market" warrant valuation most notably has been impacted by the issuance of 74.6 million additional share purchase warrants and by the closing price of our common shares, which, on the NASDAQ, decreased from $0.60 per share as of December 31, 2014 to $0.28 per share as of June 30, 2015. Furthermore, the assumptions that have been applied to determine the fair value of the alternate cashless feature included in the Series B Warrants significantly impacted the "mark-to-market" valuation during the most recent quarter.

Net loss for the three-month and six-month periods ended June 30, 2015 was $15.1 million and $24.8 million, or $0.14 and $0.27 per basic and diluted share, compared to $5.0 million and $9.4 million, or $0.09 and $0.17 per basic and diluted share, for the same periods in 2014.

The increase in net loss for the three-month period ended June 30, 2015, as compared to the same period in 2014, is predominantly due to higher comparative net finance costs and to higher comparative selling expenses, partially offset by lower comparative R&D costs, as presented above.

The increase in net loss for the six-month period ended June 30, 2015, as compared to the same period in 2014, is predominantly due to higher comparative net finance costs, to higher comparative selling expenses and to higher comparative G&A expenses, partially offset by lower comparative R&D costs, as presented above.

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Quarterly Consolidated Results of Operations Information

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Historical quarterly results of operations and net (loss) income from continuing operations cannot be taken as reflective of recurring revenue or expenditure patterns or of predictable trends, largely given the unpredictable quarterly variations attributable to our net finance (costs) income, which in turn are comprised of the impact of the periodic "mark-to-market" revaluation of our warrant liability and of foreign exchange gains and losses. Additionally, our R&D costs historically have varied on a quarter-over-quarter basis due to the ramping up or winding down of potential product candidate activities, which in turn are dependent upon a number of factors that often do not occur on a linear or predictable basis.

More recently, our selling expenses have increased on a quarter-over-quarter basis due to the ramping up of pre-commercialization activities associated with Macrilen (prior to the receipt of a Complete Response Letter from the FDA in November 2014) and to the deployment of our contracted sales force related to our promotional activities associated with EstroGel .

In addition to the items referred to above, our net (loss) income also has been impacted by net variations attributable to our discontinued operations related to the manufacturing of Cetrotide and related activities in the third and fourth quarters of 2013.

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Condensed Interim Consolidated Statement of Financial Position Information

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The increase in cash and cash equivalents as at June 30, 2015, as compared to December 31, 2014, is due to the receipt of net proceeds of $34.4 million in connection with the March 2015 Offering, by variations in components of our working capital and by the effect of exchange rate fluctuations.

The decrease in payables and other current liabilities as at June 30, 2015, as compared to December 31, 2014, is mainly explained by the decrease of our provision for restructuring costs, following severance payments made during the first half of 2015, as well as by the lower comparative exchange rate of the EUR against the US dollar, which strengthened by approximately 8.2% from December 31, 2014 to June 30, 2015.

Our warrant liability increased from December 31, 2014 to June 30, 2015 predominantly due to the issuance of 74.6 million additional share purchase warrants in connection with the March 2015 Offering, as discussed above, and to net fair value losses of $6.4 million, which were recorded pursuant to our periodic "mark-to-market" revaluation of the underlying outstanding share purchase warrants. This increase was partly offset by a $5.9 million reduction resulting from the early expiry and derecognition of 21.1 million warrants previously issued in connection with offerings completed in November 2013 and January 2014 and by a $2.1 million reduction resulting from the the exercise of 3.5 million warrants.

The decrease in shareholders' equity as at June 30, 2015, as compared to December 31, 2014, is mainly attributable to the net increase in our deficit due to the recording of our year-to-date net loss, partly offset by an actuarial gain on our pension-related employee benefit obligation. This decrease in shareholders' equity is partly offset by the increase in our share capital following the issuance of shares in connection with the March 2015 Offering and by the increase in our accumulated other comprehensive income due to foreign currency translation adjustments.

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Financial Liabilities, Obligations and Commitments

We have certain contractual lease obligation commitments. Expected future minimum lease payments and future minimum sublease receipts under non-cancellable operating leases (subleases) are as follows: