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AEterna Zentaris Reports Fourth Quarter and Full-Year 2008 Financial and Operating Results
Date:3/11/2009

All amounts are in U.S. dollars

QUEBEC CITY, March 11 /PRNewswire-FirstCall/ - AEterna Zentaris Inc. (NASDAQ: AEZS, TSX: AEZ) ("the Company"), a global biopharmaceutical company focused on endocrinology and oncology, today reported financial and operating results for the fourth quarter and the full year ended December 31, 2008.

    2008 Highlights

    - February

      - First patients treated with AEZS-108 for a Phase 2 trial in advanced
        ovarian and endometrial cancers.

    - March

      - Patient dosing commenced with cetrorelix in the second efficacy study
        of the Phase 3 program in benign prostatic hyperplasia ("BPH").
      - Completion of the sale to Paladin Labs of the marketed product,
        Impavido(R) (miltefosine), for approximately $9.2 million.

    - April

      - Appointment of Juergen Ernst, as Interim President and CEO, the
        Company's Chairman of the Board at the time, following the departure
        of our former President and CEO;
      - Completion of patient recruitment for the first efficacy study of the
        Phase 3 program in BPH with cetrorelix.

    - May

      - First patients treated with cetrorelix for the safety trial of the
        Phase 3 program in BPH.

    - June

      - Completion of the sale of the Company's Quebec City property for a
        purchase price of $7.1 million.

    - September

      - Appointment of Juergen Engel, Ph.D., as Company President and CEO,
        succeeding Juergen Ernst who, at the same time, was appointed as
        Executive Chairman of the Company.

    - October and November

      - Completion of patient recruitment for the second efficacy trial of
        the Phase 3 program with cetrorelix in BPH.

      - Initiation of the second stage of patient recruitment for AEZS-108
        Phase 2 trial in advanced ovarian and endometrial cancers.

    - December

      - Sale of AEterna Zentaris rights to royalties on future sales of
        Cetrotide(R), covered by the Company's license agreement with Merck
        Serono, to Cowen Healthcare Royalty Partners L.P. ("Cowen") for gross
        consideration of $52.5 million.
      - Completion of patient recruitment for the safety trial of the Phase 3
        program in BPH with cetrorelix.
      - Appointment of Matthias Seeber, MBA, as Company Senior Vice
        President, Administration and Legal Affairs.

    - Subsequent to year end

      - The Company entered into a development, commercialization and license
        agreement with sanofi-aventis for the development, registration and
        marketing of cetrorelix in BPH for the United States market. The
        agreement includes an initial upfront payment of $30 million and up
        to $135 million in additional payments upon achieving certain
        pre-established regulatory and commercial milestones, as well as
        escalating double-digit royalties on future net sales of cetrorelix
        for BPH in the United States.

Juergen Engel, Ph. D., AEterna Zentaris' President and Chief Executive Officer commented, "I am proud of our achievements of the past 12 months. At the financial level, we generated nearly $100 million in 2008 and in the first few months of 2009, through multiple non-dilutive transactions and a major pharmaceutical partnership with sanofi-aventis for our lead compound, cetrorelix. At the drug development level, we completed the recruitment of over 1,600 patients for our Phase 3 program in BPH with cetrorelix, according to schedule. We now look forward to disclosing results of this program throughout the second half of 2009. We also made significant progress with our lead oncology compound, AEZS-108, in endometrial and ovarian cancer with results expected by the end of this year.

Moving forward, we will continue to concentrate our efforts on bringing cetrorelix closer to market in collaboration with our partner, sanofi-aventis. We believe that this compound could prove to be a novel treatment for the benefit of millions of men with BPH and also build value for our shareholders."

Dennis Turpin, Senior Vice President and Chief Financial Officer of AEterna Zentaris added, "The non-dilutive transactions and the recent partnership with sanofi-aventis have provided the Company with an overall stronger financial position and with the necessary funds to pursue our growth strategy."

CONSOLIDATED RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2008

Consolidated revenues were $7.2 million for the quarter ended December 31, 2008, compared to $10.2 million for the same quarter in 2007. The decrease in revenues is primarily due to lower quarter-over-quarter royalties related to our license agreement with Merck Serono. Subsequent to the sale of the Company's rights to royalties on future sales of Cetrotide(R), covered by the Company's license agreement with Merck Serono, to Cowen, which was effective, for royalty determination purposes, on October 1, 2008, our periodic amortization of the gross proceeds received from Cowen, while still recognized as royalty revenues, has been lower than the royalty revenues recognized in the past, as receivable directly from Merck Serono. Additionally, quarter-over-quarter sales and royalties decreased due to the absence of sales of Impavido(R) in the fourth quarter of 2008, while license revenues witnessed a decrease due to the non-recurrence in 2008 of milestone payments received from one of our partners, related to the perifosine Phase 2 trials.

Consolidated selling, general and administrative ("SG&A") expenses were $3.0 million for the quarter ended December 31, 2008, compared to $5.1 million for the same quarter in 2007. The decrease in SG&A expenses is mainly related to the continued results of cost-saving measures that were implemented beginning in the second quarter of 2008.

Consolidated research and development ("R&D") expenses were $12.3 million for the quarter ended December 31, 2008, compared to $13.6 million for the same quarter in 2007. The decrease in R&D expenses primarily relates to the comparative reduction in expenses incurred in connection with our Phase 3 program with cetrorelix in BPH, which by the fourth quarter of 2008 was fully enrolled and less subject to larger front-end expenditures that were necessary in the earlier, fourth quarter 2007 stage of the program.

Consolidated net loss was $14.5 million, or $0.27 per basic and diluted share for the quarter ended December 31, 2008, compared to $13.6 million, or $0.26 per basic and diluted share, for the same quarter in 2007. The increase in consolidated net loss is largely attributable to a combination of lower sales and royalties, lower license fee revenues, lower manufacturing margins on Cetrotide(R) due in part to a $0.7 million write-down to net realizable value of certain components of inventory, as well as to higher amortization expense, partly offset by lower quarter-over-quarter SG&A expenses, higher net foreign exchange gains and lower income tax expense.

Consolidated cash, cash equivalents and short-term investments were $49.7 million as at December 31, 2008.

CONSOLIDATED RESULTS FOR THE FULL YEAR ENDED DECEMBER 31, 2008

Consolidated revenues were $38.5 million for the year ended December 31, 2008, compared to $42.1 million for the year ended December 31, 2007. The decrease in consolidated revenues in 2008 compared to 2007 is primarily related to lower sales of Impavido(R), a decrease in consolidated license fee revenues mainly attributable to non-recurring milestone payments and the termination of a partner licensing agreement in 2007, partly offset by an increase in sales of Cetrotide(R).

Consolidated SG&A expenses decreased to $17.3 million for the year ended December 31, 2008, compared to $20.4 million for the year ended December 31, 2007. The decrease in SG&A expenses is primarily related to the organizational changes and cost-saving measures that were implemented beginning in the second quarter of 2008.

Consolidated R&D costs were $57.4 million for the year ended December 31, 2008, compared to $39.2 million for the year ended December 31, 2007. The increase in consolidated R&D costs for the year 2008 compared to 2007 is mainly attributable to the advancement of our Phase 3 program with our lead compound, cetrorelix, in BPH.

Consolidated net loss was $59.8 million, or $1.12 per basic and diluted share, for the year ended December 31, 2008, compared to $32.3 million, or $0.61 per basic and diluted share, for the year ended December 31, 2007. The increase in consolidated net loss is attributable to a combination of lower license fee revenues, lower manufacturing margins, higher R&D costs, higher depreciation and amortization and higher income tax expense, partly offset by lower SG&A expenses and higher net foreign exchange gains.

CONFERENCE CALL

Management will be hosting a conference call for the investment community beginning at 10:00 a.m. Eastern Time today, Wednesday, March 11, 2009, to discuss fourth quarter and full-year 2008 results. Individuals interested in participating in the live conference call by telephone may dial 416-646-3095, 514-807-8791 or 800-814-4859, or may listen through the Internet at www.aezsinc.com. A replay will be available on the Company's website for 30 days following the live event.

About AEterna Zentaris Inc.

AEterna Zentaris Inc. is a global biopharmaceutical company focused on endocrine therapy and oncology, with proven expertise in drug discovery, development and commercialization. News releases and additional information are available at www.aezsinc.com.

Forward-Looking Statements

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the U.S. Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which could cause the Company's 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 R&D projects, the successful and timely completion of clinical studies, the ability of the Company to take advantage of business opportunities in the pharmaceutical industry, uncertainties related to the regulatory process 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 relating to the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The Company does not undertake to update these forward-looking statements, and we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments except if we are requested to do so by a governmental authority or applicable law.

Attachment: Financial summary

    Consolidated Results of Operations
    (Unaudited)

                                   Quarters ended          Years ended
                                     December 31,          December 31,
    -------------------------------------------------------------------------
    (in thousands, except per
     share data)                    2008     2007     2008     2007     2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $        $        $        $        $
    Revenues
      Sales and royalties          4,640    6,435   29,462   28,825   25,123
      License fees                 2,092    3,705    8,504   12,843   13,652
      Other                          512      100      512      400       24
    -------------------------------------------------------------------------
                                   7,244   10,240   38,478   42,068   38,799
    -------------------------------------------------------------------------

    Operating expenses
    Cost of sales                  4,930    3,255   19,278   12,930   11,270
    Selling, general and
     administrative expenses       3,038    5,146   17,325   20,403   16,478
    Research and development
     costs                        12,328   13,574   57,448   39,248   27,422
    R&D tax credits and grants      (137)  (1,941)    (343)  (2,060)  (1,564)
    Depreciation and amortization
      Property, plant and
       equipment                     316      378    1,515    1,562    2,816
      Intangible assets            3,084      757    5,639    4,004    6,148
    Impairment of long-lived
     asset held for sale               -      735        -      735        -
    -------------------------------------------------------------------------
                                  23,559   21,904  100,862   76,822   62,570
    -------------------------------------------------------------------------
    Loss from operations         (16,315) (11,664) (62,384) (34,754) (23,771)
    -------------------------------------------------------------------------

    Other income (expenses)
    Interest income                  131      535      868    1,904    1,441
    Interest expense                 (50)     (23)    (118)     (85)  (1,433)
    Foreign exchange gain (loss)   2,642     (269)   3,071   (1,035)     319
    Other                             46      (27)     (79)     (28)     409
    -------------------------------------------------------------------------
                                   2,769      216    3,742      756      736
    -------------------------------------------------------------------------
    Share in the results of an
     affiliated company                -        -        -        -    1,575
    -------------------------------------------------------------------------

    Loss before income taxes
     from continuing operations  (13,546) (11,448) (58,642) (33,998) (21,460)
    Income tax (expense)
     recovery                       (947)  (2,406)  (1,175)   1,961   29,037
    -------------------------------------------------------------------------
    Net (loss) earnings from
     continuing operations       (14,493) (13,854) (59,817) (32,037)   7,577
    Net (loss) earnings from
     discontinued operations           -      218        -     (259)  25,813
    -------------------------------------------------------------------------
    Net (loss) earnings for the
     period                      (14,493) (13,636) (59,817) (32,296)  33,390
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net (loss) earnings per share
     from continuing operations
      Basic                        (0.27)   (0.26)   (1.12)   (0.61)    0.14
      Diluted                      (0.27)   (0.26)   (1.12)   (0.61)    0.14
    Net (loss) earnings per share
     from discontinued operations
      Basic                            -        -        -        -     0.50
      Diluted                          -        -        -        -     0.48
    Net (loss) earnings per share
      Basic                        (0.27)   (0.26)   (1.12)   (0.61)    0.64
      Diluted                      (0.27)   (0.26)   (1.12)   (0.61)    0.62


    Consolidated Balance Sheet Information
    (Unaudited)

                                                         As at December 31,
    -------------------------------------------------------------------------
    (in thousands)                                    2008     2007     2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         $        $        $

    Cash and cash equivalents                       49,226   10,272    8,939
    Short-term investments                             493   31,115   51,550
    Accounts receivable and other current assets    12,005   18,193   41,234
    Property, plant and equipment, net               6,682    7,460   13,001
    Other long-term assets                          39,936   56,323  108,767
    -------------------------------------------------------------------------
    Total assets                                   108,342  123,363  223,491
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accounts payable and other current liabilities  22,121   21,480   15,624
    Current portion of long-term debt and payable       49      775      686
    Long-term debt and payable                         172        -      687
    Non-financial long-term liabilities             64,525   12,517   27,615
    -------------------------------------------------------------------------
    Total liabilities                               86,867   34,772   44,612
    Shareholders' equity                            21,475   88,591  178,879
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity     108,342  123,363  223,491
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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SOURCE AETERNA ZENTARIS INC.
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