Mr. David Dodd reports

AETERNA ZENTARIS REPORTS THIRD QUARTER 2014 FINANCIAL AND OPERATING RESULTS

Aeterna Zentaris Inc. has released its financial and operating results as at and for the third quarter ended Sept. 30, 2014 (all amounts are in U.S. dollars).

Research and development (R&D) costs, net of refundable tax credits and grants, for the three-month period ended Sept. 30, 2014, were $6.1-million, as compared with $6.2-million for the same period in 2013. R&D costs for the quarter ended Sept. 30, 2014, include a provision for restructuring costs, amounting to approximately $1.6-million, for severance payments and other directly related costs associated with the company's R&D restructuring activities.

Selling, general and administrative (SG&A) expenses were $3.7-million for the three-month period ended Sept. 30, 2014, compared with $2.4-million for the same period in 2013. The increase in SG&A expenses is mainly related to higher comparative foreign exchange losses, the ramping up of precommercialization activities associated with Macrilen and the recording of restructuring costs related to planned administrative staff redundancies.

Net loss for the three-month period ended Sept. 30, 2014, was $11.3-million, or 20 cents per basic and diluted share, compared with a net income of $3.8-million, or 13 cents per basic and diluted share, for the same period in 2013. The decrease in net income is due largely to lower net income from discontinued operations related to the former Cetrotide business, higher comparative operating expenses and higher comparative net finance costs.

Cash and cash equivalents totalled $42-million as at Sept. 30, 2014, as compared with $43.2-million as at Dec. 31, 2013.

David Dodd, chairman and chief executive officer of Aeterna Zentaris, commented: "During the quarter, we intensified our commercial development efforts, which resulted in the signing of a co-promotion agreement with Ascend Therapeutics for the selling of their already-marketed, leading, non-patch, transdermal, hormone replacement therapy product, EstroGel, in specific U.S. territories. This agreement will jump-start our commercial activities as we expect to start the field selling of EstroGel in a few weeks through our sales force of about 20 representatives. We intend to pursue additional commercial opportunities, including other co-promotional arrangements, in-licensing transactions or product acquisitions, throughout the remainder of the year. For Macrilen, we continued to focus on our precommercialization activities while building our core business team. We are awaiting the [Food and Drug Administration's] imminent decision on its review of our [new drug application] for Macrilen, which has a [Prescription Drug User Fee Act] date of Nov. 5, 2014. If approved, Macrilen would be the only FDA-indicated oral drug for use in evaluating adult growth hormone deficiency. As for our ongoing ZoptEC phase 3 trial in endometrial cancer, we are very pleased to report that we have completed clinical site initiation with 120 sites currently in operation, and, to date, over 300 of the expected 500 patients have been entered into the trial. We are on track to reach the number of patients required to secure our first interim analysis in the first half of 2015. Finally, we started implementing our global resources optimization program, which is expected to lead to the termination of 31 employees over a 12-month period. This program should enable us to streamline R&D activities, increase commercial operations and flexibility, ultimately reduce our operating cash burn, and more appropriately align our financial resources with our strategic goal of transitioning into a commercially operating specialty biopharmaceutical company."

Dennis Turpin, chief financial officer of Aeterna Zentaris, commented, "With our cash position, combined with the streamlining of our R&D activities, we are able to continue to advance our strategic programs in pursuit of our near-term milestones."

Third-quarter 2014 highlights:

• Pipeline:
  • Macrilen (macimorelin):
    • Continuing FDA review of the company's new drug application for Macrilen, a ghrelin agonist, which, if approved, will be the first orally administered drug indicated for the evaluation of AGHD. Results from the FDA's review are expected imminently, as the NDA has a Prescription Drug User Fee Act date of Nov. 5, 2014;
    • Continuing precommercialization activities for Macrilen, including the hiring of new employees and the appointment of a specialized third party contract sales organization, which will provide sales representatives and related commercial activities;
  • Zoptarelin doxorubicin:
    • Completed site initiation for the current ZoptEC (zoptarelin doxorubicin in endometrial cancer) phase 3 trial in endometrial cancer with 120 sites in operation. To date, over 300 patients of the expected 500 patients have been entered into this trial;
• Commercial developments:
  • Signing of a co-promotion services agreement with Ascend Therapeutics U.S. LLC. Under the terms of the co-promotion agreement, AEterna Zentaris will market Ascend's leading, non-patch, transdermal, hormone replacement therapy product, EstroGel, in specific agreed-upon U.S. territories in exchange for a sales commission. The co-promotion agreement also provides that, following regulatory approval of Macrilen, Ascend will provide similar services to AEterna Zentaris in exchange for a sales commission;
  • Subsequent to quarter-end, implementation of the company's full-time contract U.S. sales force of about 20 representatives for the field selling of EstroGel, which is expected to start during the week of Nov. 17, 2014. Together with Ascend's existing sales force, there will be a total of 53 sales representatives covering sales activities related to EstroGel. This combined sales force also will sell Macrilen following regulatory approval thereof;
• Resource optimization and executive appointment:
  • Implementation of the global resources optimization program as part of the company's objective of transitioning into a commercially operating specialty biopharmaceutical company, by streamlining R&D activities, and increasing commercial operations and flexibility. The resource optimization program is expected to result in the termination of 31 employees over a period of about 12 months;
  • Subsequent to quarter-end, appointment of Philip A. Theodore as senior vice-president, chief administrative officer, general counsel and corporate secretary;
• Corporate developments:
  • Between July 1, 2014, and Sept. 30, 2014, the company issued a total of approximately 7.4 million common shares under its at-the-market (ATM) sales agreement, entered into May, 2014, at an average price of $1.36 for aggregate gross proceeds of approximately $10.1-million, less cash and non-cash transaction costs of approximately $300,000. The May, 2014, ATM program provides that the company may, at its discretion, from time to time during the term of the sales agreement, sell up to a maximum of approximately 14 million of its common shares through ATM issuances on the Nasdaq, up to an aggregate amount of $15-million;
  • Between Oct. 1, 2014, and Nov. 4, 2014, the company issued a total of approximately 1.6 million common shares under the May, 2014, ATM program for aggregate gross proceeds of approximately $2.1-million.

Conference call

Management will be hosting a conference call for the investment community beginning at 8:30 a.m. ET tomorrow, Wednesday, Nov. 5, 2014, to discuss the 2014 third-quarter results. Individuals interested in participating in the live conference call by telephone may dial, in Canada, 514-807-9895 or 647-427-7450, and outside Canada, 888-231-8191. They may also listen through the company's website in the newsroom section. A replay will be available on the company's website for 30 days following the live event.

For reference, the management's discussion and analysis of financial condition and results of operations for the third quarter of 2014, as well as the company's condensed interim consolidated financial statements, can be found on the company's website in the investors section.

  CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME INFORMATION
                     (in thousands, except share and per share data)  

                              Three months ended Sept. 30,   Nine months ended Sept. 30,
                                    2014             2013          2014            2013
Revenues
Sales and royalties                    -                -             -              96
Licence fees and other                 -               17             -           6,079
                                       -               17             -           6,175
Operating expenses
Cost of sales                          -                -             -              51
Research and development
costs, net of refundable
tax credits and grants             6,142            6,230        17,434          15,939
Selling, general and
administrative expenses            3,701            2,435         9,014           9,689
                                   9,843            8,665        26,448          25,679
(Loss) from operations            (9,843)          (8,648)      (26,448)        (19,504)
Finance income                     1,091            1,384         5,266           3,567
Finance costs                     (2,877)            (535)            -            (707)
Net finance (costs)
income                            (1,786)             849         5,266           2,860
Net (loss) from
continuing operations            (11,629)          (7,799)      (21,182)        (16,644)
Net income from
discontinued operations              292           11,641           465          31,702
Net (loss) income                (11,337)           3,842       (20,717)         15,058
Other comprehensive
(loss) income
Items that may be
reclassified subsequently
to profit or (loss)
Foreign currency
translation adjustments             (387)             550          (481)            649
Items that will not be
reclassified to
profit or (loss)
Actuarial (loss) on
defined benefit plans             (1,099)               -        (3,169)              -
Comprehensive (loss) income      (12,823)           4,392       (24,367)         15,707
Net (loss) per share
(basic and diluted)
from continuing operations         (0.20)           (0.26)        (0.37)          (0.62)
Net income per share
(basic and diluted)
from discontinued operations           -             0.39          0.01            1.18
Net (loss) income per
share (basic and diluted)          (0.20)            0.13         (0.36)           0.56