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Aeterna Zentaris Reports Second Quarter 2017 Financial and Operating Results

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Macrilen™ NDA filed at end of Q2; FDA granted a PDUFA date of
December 30, 2017

All amounts are in US Dollars

Recent key developments

  • Macrilen™ development progressing toward completion
    • The Company announced on June 30, 2017 that a new drug application
      ("NDA") seeking approval of Macrilen™ (macimorelin), an orphan
      drug, for the evaluation of growth hormone deficiency
      in adults ("AGHD") was resubmitted to the U.S. Food and Drug
      Administration (the "FDA") on such day.
    • On July 18, 2017, the Company announced that we had been notified
      by the FDA that our NDA seeking approval of Macrilen™ for the
      evaluation of AGHD had been accepted as a complete response to the
      FDA's November 5, 2014 Complete Response Letter and granted a
      PDUFA date of December 30, 2017.
  • Cost reduction measures
    • Restructuring Program of the Frankfurt, Germany operations was
      approved by the Company and the German Work Council.
    • The total cost of the Restructuring Program is expected to be
      approximately $2.0 million. Most of the restructuring costs are
      expected to be paid in the financial year ending December 31, 2018.
    • Three sales representatives and one sales-manager position were
      eliminated at quarter-end as part of sales force optimization
      prior to anticipated sales force expansion related to Macrilen™
      commercialization.
  • Cash on hand sufficient to get to expected approval
    • $13.9 million of unrestricted cash and cash equivalents at
      quarter-end; no third-party debt.
    • Approximately $2.6 million of net proceeds raised from sales of
      Common Shares pursuant to our current ATM program subsequent to
      the end of the second quarter.
    • Approximately 16.1 million Common Shares outstanding as of August
      10, 2017.

Aeterna Zentaris Inc. (NASDAQ:AEZS) (TSX:AEZS) (the "Company"), a
specialty biopharmaceutical company engaged in developing and
commercializing novel pharmaceutical therapies, today reported financial
and operating results for the second quarter ended June 30, 2017.

Commenting on recent key developments, Michael V. Ward, Chief Executive
Officer of the Company, stated, "On June 30, 2017, we reported that we
re-submitted an NDA for Macrilen™, which was ahead of our previously
announced goal. On July 18, 2017 we were notified by the FDA of a PDUFA
date of December 30, 2017. If the product is approved, it will be the
only FDA-approved drug for assessing AGHD and we believe it is likely to
rapidly become the new method for confirming AGHD."

Addressing the Company's future plans, Mr. Ward stated, "We are
continuing our commercial organization and infrastructure preparation
for the earliest possible launch of Macrilen™ in the United States. Our
goal is to be prepared to launch the product in the first quarter of
2018. We are also reviewing our resources and making adjustments
consistent with our focus on commercializing Macrilen™. In this regard,
we continue to concentrate our selling efforts on the territories that
will be key to the successful commercialization of Macrilen™. As a
result, we eliminated one sales manager position and three sales
territories at the end of the quarter. Furthermore, we decided to effect
a substantial reduction in our Frankfurt organization because of the
discontinuance of our work on Zoptrex™ and related development programs.
With the implementation of the restructuring plan, we expect to have
approximately 10 employees in Frankfurt by the end of 2018, as compared
to our current roster of 35 employees there. The total cost of the
Restructuring Program is expected to be approximately $2.0 million and
should lead to annual savings of approximately $2.5 million following
complete implementation expected to be at the end of 2018. The majority
of the restructuring costs are expected to be paid in the financial year
ending December 31, 2018. Overall, we are focused on progressing
Macrilen™ through regulatory approval and commercialization, while
continuing to ensure that we optimize the use of our resources and
capital. Finally, following the cost savings measure and the latest ATM
share issuances, we improved our financial condition in order to have a
stronger balance sheet at the end of 2017."

Mr. Ward continued his commentary, "The Company has reached an important
point in its evolution and is conducting a strategic review of its
plans, resources and opportunities in order to best position itself to
maximize shareholder value and formed a special committee of independent
directors (the "Strategic Review Committee") to consider and evaluate
various strategic and financing alternatives available to the Company to
maximize shareholder value, including continuing to execute on its
existing business plan and/or considering and recommending changes to
the Company's management and governance."

Second Quarter 2017 Financial Highlights

Revenues

Revenues were $243,000 and $504,000 for the three and six months ended
June 30, 2017, as compared to $96,000 and $338,000 for the same periods
in 2016. The increase is mainly explained by the expanded contract with
APIFINY® which was effective June 1, 2016 and the
amortization of the up-front payment received in connection with one of
the out-licensing agreements that we entered into in the third quarter
of 2016 for ZoptrexTM.

Research and Development ("R&D") costs

R&D costs were $3.6 million and $6.1 million for the three and six
months ended June 30, 2017, compared to $3.7 million and $7.4 million
for the same periods in 2016. R&D costs remained stable for the
three-month period ended June 30, 2017. The decrease in our R&D costs
for the six months ended June 30, 2017, as compared to the same period
in 2016, is mainly attributable to lower third-party costs attributable
to Zoptrex™, which is mainly due to the fact that we completed the
clinical portion of the ZoptEC trial during the first quarter of 2017.
Third-party costs attributable to Macrilen™ also decreased during the
six months ended June 30, 2017, as compared to the same period in 2016.
This is mainly due to the fact that we completed the Phase 3 clinical
trial at the end of 2016. The costs incurred in 2017 are related to the
detailed analysis of the top-line results as well as preparation of the
NDA filing, which was submitted on June 30, 2017.

General and Administrative ("G&A") Expenses

G&A expenses were $1.9 million and $3.8 million for both the
three and six-month periods ended June 30, 2017 and 2016 and are in line
with expectations.

Selling Expenses

Selling expenses were $1.4 million and 3.0 million for the three
and six months ended June 30, 2017, as compared to $1.7 million and $3.4
million for the same periods in 2016. Selling expenses for the three and
six months ended June 30, 2017 and 2016 represent mainly the costs of
our sales force related to the co-promotion activities as well as our
sales management team. The decrease in selling expenses is explained by
the reduction in the number of sales representatives from 20 to 13 since
February 2017. In July 2017, we further reduced the number of sales
representative to 10 and we reduced our headcount by one sales manager.
We believe that we will be able to expand our sales force quickly
following the expected approval of MacrilenTM.

Net Finance Income

Net finance income was $4.1 million and $5.6 million for the
three and six months ended June 30, 2017, as compared to $0.2 million
and $3.5 million, for the same periods in 2016. The increase in finance
income is mainly attributable to the change in fair value recorded in
connection with our warrant liability. Such change in fair value results
from the periodic "mark-to-market" revaluation, via the application of
option pricing models, of outstanding share purchase warrants. The
closing price of our common shares, which, on the NASDAQ, fluctuated
from $0.84 to $3.65 during the six-month period ended June 30, 2017,
compared to $2.67 to $4.40 during the same period in 2016, also had a
direct impact on the change in fair value of warrant liability.

Net Loss

Net loss for the three and six months ended June 30, 2017 was $2.6
million and $6.7 million (or $0.18 and $0.49 per share), as compared to
a net loss of $7.0 million and $10.7 million (or $0.71 and $1.08 per
share) for the same periods in 2016. The decrease in net loss and net
loss per share for the three and six months ended June 30, 2017, as
compared to the same periods in 2016, is largely attributable to lower
operating expenses as well as higher net finance income, as presented
above.

Liquidity

Cash and cash equivalents were $13.9 million as at June 30, 2017, as
compared to $22.0 million as at December 31, 2016. The decrease in cash
and cash equivalents as at June 30, 2017, as compared to December 31,
2016, is due to the net cash used in operating activities including
variations in components of our working capital. The decrease was
partially offset by the net proceeds generated by the issuance of common
shares under our various ATM programs.

Conference Call

The Company will host a conference call to discuss these results on
Friday, August 11, 2017, at 8:30 a.m., Eastern Time. Participants may
access the conference call using the following dial-in number:
201-689-8029 and Confirmation number #13665527 . A replay of the
conference call will also be available on the Company's website for a
period of 30 days.

For reference, the Management's Discussion and Analysis of Financial
Condition and Results of Operations for the second quarter ended June
30, 2017, as well as the Company's interim condensed consolidated
financial statements as at June 30, 2017, can be found at www.aezsinc.com
in the "Investors" section.

About Aeterna Zentaris Inc.

Aeterna Zentaris is a specialty biopharmaceutical company engaged in
developing and commercializing novel pharmaceutical therapies. We are
engaged in drug development activities and in the promotion of products
for others. We recently resubmitted an NDA to the FDA seeking approval
of MacrilenTM, an internally developed compound. The focus of
our business development efforts is the acquisition of licenses to
products that are relevant to our therapeutic areas of focus. We also
intend to license out certain commercial rights of internally developed
products to licensees in non-U.S. territories where such out-licensing
would enable us to ensure development, registration and launch of our
product candidates. Our goal is to become a growth-oriented specialty
biopharmaceutical company by pursuing successful development and
commercialization of our product portfolio, achieving successful
commercial presence and growth, while consistently delivering value to
our shareholders, employees and the medical providers and patients who
will benefit from our products. For more information, visit www.aezsinc.com.

Forward-Looking Statements

This press release contains forward-looking statements made pursuant to
the safe-harbor provision of the U.S. Securities Litigation Reform Act
of 1995, which reflect our current expectations regarding future events.
Forward-looking statements may include, but are not limited to
statements preceded by, followed by, or that include the words
"expects," "believes," "intends," "anticipates," and similar terms that
relate to future events, performance, or our results. Forward-looking
statements involve known risks and uncertainties, many 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 U.S. Securities and Exchange Commission ("SEC"). Such
statements include, but are not limited to, statements about the timing
of, and prospects for, regulatory approval and commercialization of our
product candidates, 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
forward-looking statements. Such risks and uncertainties include, among
others, our now heavy dependence on the success of Macrilen™ and the
continued availability of funds and resources to successfully launch the
product in the event the FDA approves Macrilen™, the rejection or
non-acceptance of the NDA by one or more regulatory authorities and,
more generally, uncertainties related to the regulatory process, the
ability of the Company to efficiently commercialize Macrilen™, the
degree of market acceptance of Macrilen™ in the event it is approved for
commercialization by the FDA, our ability to take advantage of business
opportunities in the pharmaceutical industry, our ability to protect our
intellectual property, the potential of liability arising from
shareholder lawsuits and general changes in economic conditions.
Investors should consult the Company's quarterly and annual filings with
the Canadian and U.S. securities commissions for additional information
on risks and uncertainties. Given these uncertainties and risk factors,
readers are cautioned not to place undue reliance on these
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 applicable law.

Attachment: Financial summary

   
Condensed Interim Consolidated Statements of Comprehensive Loss
Information

(in thousands, except share and per share data)

 
Three months ended June 30, Six months ended June 30,

(unaudited)

2017   2016 2017   2016
$ $ $ $
Revenues
Sales commission and other 131 33 284 214
License fees 112   63   220   124  
243   96   504   338  
Operating expenses
Research and development costs 3,599 3,707 6,054 7,364
General and administrative expenses 1,874 1,865 3,755 3,759
Selling expenses 1,449     1,708   2,991   3,390  
6,922     7,280   12,800   14,513  
Loss from operations (6,679 ) (7,184 ) (12,296 ) (14,175 )
Gain (loss) due to changes in foreign currency exchange rates 196 (78 ) 261 390
Change in fair value of warrant liability 3,914 190 5,317 2,995
Other finance income 19   64   37   106  
Net finance income 4,129   176   5,615   3,491  
Net loss (2,550 ) (7,008 ) (6,681 ) (10,684 )
Other comprehensive (loss) income:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments (659 ) 230 (792 ) (239 )
Items that will not be reclassified to profit or loss:
Actuarial gain (loss) on defined benefit plans 194   (797 ) 635   (2,222 )
Comprehensive loss (3,015 ) (7,575 ) (6,838 ) (13,145 )
Net loss per share (basic and diluted) (0.18 ) (0.71 ) (0.49 ) (1.08 )
Weighted average number of shares outstanding:
Basic and Diluted 14,086,508   9,936,541   13,776,045   9,932,641  
 
   
Condensed Interim Consolidated Statement of Financial Position
Information
(in thousands)
 
As at June 30, As at December 31,
(unaudited) 2017 2016
$ $
Cash and cash equivalents 1 13,931 21,999
Trade and other receivables and other current assets 1,007 744
Restricted cash equivalents 467 496
Property, plant and equipment 139 204
Other non-current assets 8,962   8,216
Total assets 24,506   31,659
Payables and other current liabilities 3,568 3,778
Current portion of deferred revenues 462 426
Warrant liability 1,537 6,854
Non-financial non-current liabilities 2 14,448   14,389
Total liabilities 20,015   25,447
Shareholders' equity 4,491   6,212
Total liabilities and shareholders' equity 24,506   31,659
 
_________________________
1.   Approximately $0.7 million and $1.5 million were denominated in EUR
as at June 30, 2017 and December 31, 2016, respectively, and
approximately $1.9 million and $3.7 million were denominated in
Canadian dollars as at June 30, 2017 and December 31, 2016,
respectively.
 
2. Comprised mainly of employee future benefits, provisions for onerous
contracts and non-current portion of deferred revenues.
 

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