AEterna Zentaris Reports 2006 Third Quarter Results

QUEBEC CITY, QC, Nov. 13 /PRNewswire-FirstCall/ - Aeterna Zentaris Inc. today reported financial and operating results for the third quarter ended September 30, 2006.

"The third quarter was marked by significant progress with the clinical development of our luteinizing hormone-releasing hormone (LHRH) antagonist compound, ozarelix, for which we disclosed positive Phase 2 results in both prostate cancer and benign prostatic hyperplasia," said Gilles Gagnon, Aeterna Zentaris' President and Chief Executive Officer. "These very encouraging results enable us to pursue ozarelix's clinical development in both indications, moving forward with an ongoing Phase 2b trial in prostate cancer as well as the potential to initiate a late-stage program in benign prostatic hyperplasia in 2007. Furthermore, we granted Nippon Kayaku an exclusive license to develop and market ozarelix for all potential oncological indications in Japan. Additionally, we launched the first LHRH antagonist to enter the Japanese market, Cetrotide(R) (cetrorelix) for in vitro fertilization with our Japanese partners. We are pleased with these significant achievements as they clearly represent our commitment to aggressively move our product candidates through the pipeline and bring our lead compounds even closer to market."

Key Developments for the Quarter Ended September 30, 2006 - Positive Phase 2 results for ozarelix in prostate cancer - The study achieved its primary end-point of defining a tolerable dosage regimen of ozarelix that would ensure continuous suppression of testosterone at castration level (< 0.5 ng/ml) for a three-month test period. The detailed results from the study will be presented at the upcoming SIU (Societe internationale d'urologie) meeting in Cape Town, South Africa, on November 13, 2006. - Positive Phase 2 results for ozarelix in benign prostatic hyperplasia (BPH) - With highly statistically significant positive data, the study achieved its primary efficacy end-point of improving clinical symptoms of BPH, at week 12, as measured by significant changes in the International Prostate Symptom Score (I-PSS), the standard method of assessing BPH symptoms. - Partnership for ozarelix in Japan - Aeterna Zentaris granted Nippon Kayaku an exclusive license to develop and market ozarelix for all potential oncological indications in Japan. - Cetrotide(R) (cetrorelix) launched in Japan for in vitro fertilization - Cetrotide(R) (cetrorelix), the first LHRH antagonist to enter the Japanese market, has been launched in Japan for in vitro fertilization. Cetrotide(R) (cetrorelix) is being manufactured and marketed in Japan by partners Nippon Kayaku Co., Ltd. and Shionogi & Co., Ltd. Financial Results for the Quarter Ended September 30, 2006

Consolidated revenues for the quarter ended September 30, 2006 totalled $83.9 million compared to $52.9 million for the same period in 2005.

Consolidated R&D expenses, net of tax credits and grants (R&D) remained steady during the third quarter at $6.2 million compared to $6.1 million for the same period in 2005.

Consolidated selling, general and administrative (SG&A) expenses increased to $15.1 million for the quarter ended September 30, 2006 compared to $9.8 million for the same period in 2005.

Consolidated net loss for the quarter ended September 30, 2006 was $6.5 million or $0.12 per basic and diluted share, compared to $3.8 million or $0.08 per basic and diluted share for the same period in 2005. The increase is mainly attributable to increased non-recurring corporate expenses and future income tax expense, partly offset by the increased contribution of Atrium.

Cash, cash equivalents and short-term investments reached $45.8 million for the quarter ended September 30, 2006 compared to $52.7 million as of December 31, 2005. More than $25 million was dedicated to the Company's Biopharmaceutical segment as of September 30, 2006. Taking into account the sale of 24% of Aeterna Zentaris' ownership interest in Atrium that occurred on October 18, 2006, Aeterna Zentaris' pro-forma cash and short-term position dedicated to its Biopharmaceutical segment reached $71 million, compared to $34.8 million as of December 31, 2005.

Dennis Turpin, Vice President and Chief Financial Officer of Aeterna Zentaris, commented, "With a strong balance sheet, a controlled burn rate and a clear development strategy, we are well positioned to execute our business plan."

Developments Subsequent to Quarter End - Closing of secondary offering of Aeterna Zentaris' 3,485,000 subordinate voting shares of Atrium Biotechnologies Inc., at a price of Cdn$15.80 per share - In early January 2007, Aeterna Zentaris intends, subject to receiving regulatory and other approvals, to distribute all of its remaining 11,052,996 subordinate voting shares of Atrium to its shareholders.

Gilles Gagnon, President and Chief Executive Officer at Aeterna Zentaris concluded, "Over the past few months, we have successfully achieved major milestones. We now look forward to continuing this great momentum for the remainder of the year and emerge in early 2007 as a late-stage pure play biopharmaceutical company, in an effort to further unlock value to our shareholders."

Management will be hosting a conference call for the investment community beginning at 10:30 a.m. Eastern Time today, Monday, November 13, to discuss 2006 third quarter financial and operating results, followed by a question and answer session.

To participate in the live conference call by telephone, please dial 416-644-3415, 514-807-8791 or 800-814-4857. Individuals interested in listening to the conference call on the Internet may do so by visiting www.aeternazentaris.com. A replay will be available on the Company's Web site for 30 days.

About Aeterna Zentaris Inc.

Aeterna Zentaris Inc. is a growing 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.aeternazentaris.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.

Attachment: Financial summary (In thousands of US dollars, except share and per share data) Quarters ended Nine months ended CONSOLIDATED RESULTS September 30, September 30 Unaudited 2006 2005 2006 2005 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ Revenues 83,893 52,879 251,760 174,888 ------------------------------------------------------------------------- Operating expenses Cost of sales 55,664 34,073 165,479 109,800 Selling, general and administrative 15,125 9,836 44,209 29,785 R&D costs, net of tax credits and grants 6,194 6,147 20,475 18,692 Depreciation and amortization 2,517 1,837 7,376 5,666 ------------------------------------------------------------------------- 79,500 51,893 237,539 163,943 ------------------------------------------------------------------------- Earnings from operations 4,393 986 14,221 10,945 Interest income 539 339 1,414 1,071 Interest expense (1,971) (2,241) (7,198) (7,067) Foreign exchange gain (loss) 109 (404) 26 (351) ------------------------------------------------------------------------- Earnings (loss) before the following items 3,070 (1,320) 8,463 4,598 Current income taxes (2,010) (251) (6,401) (4,503) Future income taxes (4,244) (753) (2,425) (1,915) Gain (loss) on dilution of investments (5) 109 (140) 16,502 Non-controlling interest (3,316) (1,544) (10,144) (5,047) ------------------------------------------------------------------------- Net earnings (loss) for the period (6,505) (3,759) (10,647) 9,635 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings (loss) per share Basic (0.12) (0.08) (0.21) 0.21 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted (0.12) (0.08) (0.21) 0.20 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares Basic 52,692,065 46,139,814 51,900,754 46,139,814 Diluted 53,040,488 46,397,156 52,390,209 46,459,000 Issued and outstanding shares 53,160,970 46,139,814 Biopharmaceutical Segment - Selected Financial Information (In thousands of US dollars) Quarters ended Nine months ended September 30, September 30 Unaudited 2006 2005 2006 2005 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ Revenues Sales and royalties 8,419 5,462 20,222 17,741 License fees 2,211 3,562 8,539 15,190 ------------------------------------------------------------------------- 10,630 9,024 28,761 32,931 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cost of sales 3,992 1,941 8,037 6,110 Selling and administrative 4,540 3,840 12,900 11,125 R&D expense, net of tax credits and grants 6,181 6,067 20,247 18,498 Depreciation and amortization 1,673 1,536 4,889 4,794 ------------------------------------------------------------------------- 16,386 13,384 46,073 40,527 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Loss from operations (5,756) (4,360) (17,312) (7,596) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash flows used by operating activities (1,711) (3,814) (8,753) (3,567) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEET As at As at September 30, December 31, Unaudited 2006 2005 $ $ Cash and short-term investments 45,753 52,705 Other current assets 111,634 110,971 ----------------------------- 157,387 163,676 Long-term assets 274,253 263,835 ----------------------------- Total assets 431,640 427,511 ----------------------------- ----------------------------- Current liabilities 63,450 64,174 Long-term debt 99,144 135,743 Other long-term liabilities 54,367 53,532 Non-controlling interest 77,938 64,531 ----------------------------- 294,899 317,980 Shareholders' equity 136,741 109,531 ----------------------------- Total liabilities and shareholders' equity 431,640 427,511 ----------------------------- -----------------------------

AETERNA ZENTARIS INC.

CONTACT: Media Relations: Paul Burroughs, (418) 652-8525, ext. 406,paul.burroughs@aeternazentaris.com; Investor Relations: Jenene Thomas,(418) 655-6420,(908) 996-3154, jenene.thomas@aeternazentaris.com