Dr. Klaus Paulini reports
AETERNA ZENTARIS REPORTS SECOND QUARTER 2020 FINANCIAL RESULTS AND PROVIDES BUSINESS UPDATE
Aeterna Zentaris Inc. has released its financial and operating results for the second quarter ended June 30, 2020.
The Company also provided an update on its clinical program to expand the use of macimorelin for the diagnosis of childhood-onset growth hormone deficiency ("CGHD"), an area of significant unmet need, and its plans to expand macimorelin for the diagnosis of adult growth hormone deficiency ("AGHD") in Europe and other key markets.
"We are pleased with the progress we have made over the last quarter across our business, despite the challenges of the COVID-19 pandemic. The health and safety of our team remains a top priority and as such, we continue to actively take steps to ensure the highest level of safety for our employees. We are incredibly grateful for their dedication and maintaining operations amidst navigating these unprecedented times. I am happy to report that we have been fortunate enough to not have experienced any significant delays or impacts to our operations to date from the pandemic," commented Dr. Klaus Paulini, Chief Executive Officer of Aeterna.
"We have continued advancing the development of macimorelin for CGHD, which we believe represents a significant opportunity for the Company and, if approved, has the potential to significantly increase the available patient population for macimorelin. Additionally, the EMA accepted our modification to the Pediatric Investigation Plan (PIP), which streamlined our clinical efforts, allowing the P02 Study protocol to comply with requirements from both the EMA and FDA," added Dr. Paulini.
Successfully raised a total of $19 million, including a registered direct offering priced at-the-market under Nasdaq rules for gross proceeds of $7.0 million and a public offering for gross proceeds of $12 million to the Company;
Regained compliance with minimum stockholders' equity requirement for continued listing on Nasdaq;
Announced that the abstract on study results of the Company's first pediatric study on macimorelin has been selected for presentation at the 22nd European Congress of Endocrinology (e-ECE 2020) being held September 5-9, 2020;
Executed on expanding intellectual property portfolio for macimorelin with the filing of two additional patent applications;
- Entered into an exclusive distribution and related quality agreement with Megapharm Ltd., a leading Israel-based biopharmaceutical company, for the commercialization of macimorelin in Israel and the Palestinian Authority;
Received European Medicines Agency ("EMA") acceptance of modification request of the Company's PIP for macimorelin as originally approved in March 2017, which covered the conduct of two pediatric studies and defined relevant key elements in the outline of these studies; and
- Achieved positive results for the pediatric dose-escalation study, Study P01, of macimorelin, indicating favorable safety and tolerability data for the use in childhood-onset growth hormone deficiency testing.
Dr. Paulini concluded: "On the commercial side we continue to work diligently to expand macimorelin for AGHD in key global markets around the world. Our distribution agreement with Megapharm was an important milestone for the Company to address the interesting market opportunity in Israel and the Palestine Authority. In Europe, we are encouraged by our ongoing partnership talks and hope to communicate more about those in the near-term. Beyond macimorelin, we are actively seeking opportunities to re-establish a development pipeline and look forward to providing more updates as they become available."
Macimorelin Clinical Program Update
The Company's lead product, macimorelin, is the only United States Food and Drug Administration ("FDA") approved oral drug indicated for the diagnosis of AGHD and is currently marketed in the United States ("U.S.") under the tradename Macrilen, by Novo Nordisk. Aeterna is currently developing macimorelin for the diagnosis of CGHD, an area of significant unmet need, in collaboration with Novo Nordisk.
Upcoming Anticipated Program Milestones:
Commence CGHD safety and efficacy study, Study P02 (multi-national, including U.S.);
Advance business development efforts to secure a marketing partner for macimorelin for the diagnosis of AGHD in Europe and other key markets.
Financings Completed After June 30, 2020
On July 7, 2020, the Company closed a public offering of 26,666,666 units at a price to the public of $0.45 per unit, for gross proceeds of $12 million, before deducting placement agent fees and other offering expenses payable by the Company, estimated at $1.5 million. Each unit contained one common share (or common share equivalent in lieu thereof) and one investor share purchase warrant to purchase one common share. In total, 26,666,666 common shares, 26,666,666 investor share purchase warrants at an exercise price of $0.45 per share expiring July 7, 2025 and 1,866,667 placement agent warrants with an exercise price of $0.5625 per share, expiring July 1, 2025 were issued.
Additionally, on August 3, 2020, the Company announced that it had entered into a securities purchase agreement with several institutional investors in the United States providing for the sale and issuance of 12,427,876 common shares at a purchase price of $0.56325 per common share in a registered direct offering priced at-the-market under Nasdaq rules for gross proceeds of approximately $7.0 million, closing on August 5, 2020. Concurrently, the Company also issued to the purchasers unregistered warrants to purchase up to an aggregate of 9,320,907 common shares. The warrants are exercisable for a period of five and one-half years, exercisable immediately following the issuance date and have an exercise price of $0.47 per common share. In addition, the Company has issued unregistered warrants to the placement agent to purchase up to an aggregate of 869,952 common shares, with an exercise price of $0.7040625 per share and an expiration date of August 3, 2025.
On August 4, 2020, prior to closing the recently announced financing, the Company had approximately $17 million cash and cash equivalents. Based on current expectations, management believes it has sufficient capital to fund operations through 2023.
Summary of Second Quarter 2020 Financial Results (all amounts are in U.S. dollars)
For the three-month period ended June 30, 2020, the Company reported a consolidated net loss of $3.5 million, or $0.15 loss per common share (basic), as compared with a consolidated net income of $0.2 million, or $0.01 income per common share (basic) for the three-month period ended June 30, 2019. The $3.7 million decline in net results is primarily from a change in fair value of warrant liability of $6.1 million partially offset by a reduction of $2.3 million in operating expenses.
The Company reported total revenue for the three-month period ended June 30, 2020 of $0.07 million as compared with $0.2 million for the same period in 2019, representing a decrease of $0.13 million. The 2020 revenue was comprised of $0.01 million in royalty revenue (2019 - $0.01 million), $nil in product sales of Macrilen (macimorelin) to Novo (2019 - $0.13 million), $0.04 million in supply chain revenue (2019 - $0.04 million) and $0.02 million in licensing revenue (2019 -- $0.02 million).
The Company reported total operating expenses for the three-month period ended June 30, 2020 was $1.5 million as compared with $3.8 million for the same period in 2019, representing a decrease of $2.3 million. This decrease arises primarily from a $0.8 million decline in general and administrative expenses, a $0.8 million decline in restructuring costs, a $0.4 million decline in research and development costs, and a $0.3 million decline in selling expenses. The impact of our June 2019 restructuring in our German subsidiary, namely payroll and share based compensation costs, is a key influence in the declines in general and administrative expenses, selling and research and development expenses.
The further impact on the decline in research and development costs is attributed to the different phases of activity of Study P01. In the first half of 2019, study activities included study start with document development, medication manufacturing, study feasibility testing at different sites and clinical trial applications in Hungary, Poland, Belarus, Russia, Ukraine and Serbia, while in 2020, all sites had completed their enrollment and clinical activities.
Net Finance (Costs) Income:
The Company reported net finance costs for the three-month period ended June 30, 2020 was $2.0 million as compared with a net finance income of $3.9 million for the same period in 2019, representing a decrease of $5.9 million. This is primarily due to a $6.1 million change in fair value of warrant liability offset by $0.2 million from changes in currency exchange rates. Effective June 16, 2020, the Company registered the common shares underlying the 2,608,696 investor warrants and 243,478 placement agent warrants issued on February 21, 2020 and the 3,325,000 investor warrants issued on September 20, 2019 by way of a registration statement which removed the cashless exercise option for registered warrants.
Consolidated Financial Statements and Management's Discussion and Analysis
For reference, the Management's Discussion and Analysis of Financial Condition and Results of Operations for the second quarter of 2020, as well as the Company's audited consolidated financial statements as of June 30, 2020, will be available at the company's website as well as on SEDAR and EDGAR.
In 2020, the COVID-19 pandemic began causing significant financial market declines and social dislocation. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The spread of COVID-19 may impact the Company's operations, including the potential interruption of our clinical trial activities and the Company's supply chain, or that of the Company's licensee. For example, the COVID-19 outbreak may delay enrollment in the Company's clinical trials due to prioritization of hospital resources toward the outbreak, and some patients may be unwilling to be enrolled in the Company's trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay the Company's ability to conduct clinical trials or release clinical trial results and could delay the Company's ability to obtain regulatory approval and commercialize the Company's product candidates. The pandemic may also impact the ability of the Company's suppliers to deliver components or raw materials on a timely basis or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. The Company's licensee may be impacted due to significant delays of diagnostic activities in the U.S. To date, the Company has not experienced significant business disruption from COVID-19.
About Aeterna Zentaris Inc.
Aeterna Zentaris is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company's lead product, Macrilen (macimorelin), is the first and only U.S. FDA and European Commission approved oral test indicated for the diagnosis of adult growth hormone deficiency (AGHD). Macrilen is currently marketed in the United States through a license agreement with Novo Nordisk and Aeterna Zentaris receives double-digit royalties on sales. Aeterna Zentaris owns all rights to macimorelin outside of the U.S. and Canada.
Aeterna Zentaris is also leveraging the clinical success and compelling safety profile of macimorelin to develop it for the diagnosis of child-onset growth hormone deficiency (CGHD), an area of significant unmet need.
The Company is actively pursuing business development opportunities for the commercialization of macimorelin in Europe and the rest of the world, in addition to other non-strategic assets to monetize their value.
We seek Safe Harbor.
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