Third Quarter 2010 Management s Discussion and Analysis of Financial Condition and Results of Operations Third Quarter Highlights Perifosine

Management s Discussion and Analysis of Financial Condition and Results

July 14, 2010: Perifosine receives orphan-drug

designation by the United States Food and Drug Administration ( FDA ) for the

treatment of neuroblastoma, a cancer of the nervous system affecting mostly

children and infants.

August 5, 2010: Announcement that a clinical investigator had been awarded a grant from

the National Institutes of Health ( NIH ) for a Phase 1/2 study in

advanced refractory prostate cancer with AEZS-108.

July 14, 2010: Presentation at the Seventh

International Congress of Neuroendocrinology in Rouen, France, of an abstract on Solorel, an oral synthetic ghrelin

receptor agonist, as a diagnostic test for Adult Growth Hormone Deficiency ( AGHD ).

Subsequent to Quarter-End

October 5, 2010: Presentation at the Fifth

International Congress of the Growth Hormone Research Society and

the Insulin-like Growth Factors Society in New York City, of interim Phase 3 data on Solorel demonstrating

the potential to provide a simple, well tolerated and safe oral diagnostic test

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 nine-month periods ended September 30, 2010. In this MD&A, 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 unaudited interim consolidated financial statements and related notes

thereto as at September 30, 2010 and for the three-month and nine-month

periods ended September 30, 2010 and 2009. Those unaudited interim consolidated financial statements have

been prepared in accordance with Canadian generally accepted accounting

principles ( Canadian GAAP ) for financial information, which differ in certain

respects from United States generally accepted accounting principles ( US GAAP ).

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

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 , 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 such regulatory authorities as the 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 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.

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 provide continuous disclosure information such as interim and annual

financial statements, MD&As, 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 office of the Secretary of the Company or

on the Internet at the following addresses: www.aezsinc.com, www.sedar.com and

Zentaris Inc. (Nasdaq: AEZS and TSX:

AEZ) is a late-stage oncology drug development company currently

investigating potential treatments for various cancers including colorectal,

ovarian, endometrial cancer, as well as multiple myeloma. Our innovative

approach of personalized medicine means tailoring treatments to a patient s

specific condition and unmet medical needs. The Company s deep pipeline is

drawn from our proprietary discovery unit providing constant and long-term

access to state-of-the-art therapeutic options.

The highest priorities for

the Company are perifosine, for which a Phase 3 program is ongoing in

multiple myeloma and in refractory advanced colorectal cancer, combined with a

Phase 2 program in a number of

different cancers, as well

as AEZS-108, for which a Phase 2 program is ongoing in advanced

endometrial and advanced ovarian cancer.

Additionally, we are

advancing AEZS-112, an oral anticancer agent which involves three mechanisms of

action (tubulin, topoisomerase II and angiogenesis inhibition) in Phase 1, as

well as several preclinical programs with novel targeted potential development

We are also advancing

Solorel, a ghrelin agonist, which is in Phase 3 trial as a growth hormone

stimulation test for the diagnosis of AGHD.

We are currently at a stage

in which some of our products and product candidates are being further

developed or marketed jointly with strategic partners.

Developments for the Three Months Ended September 30, 2010

Status of our drug pipeline

as at November 9, 2010

Perifosine is a novel, oral

anticancer treatment that inhibits Akt activation in the phosphoinositide

3-kinase ( PI3K ) pathway. Perifosine, in combination with chemotherapeutic

agents, is currently in Phase 3 studies for the treatment of multiple

myeloma, colorectal cancer and in Phase 2 studies for the treatment of other