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AEterna Zentaris Reports Fourth Quarter And Full-Year 2014 Financial And Operating Results

Published: Mar 18, 2015

All amounts are in US dollars

QUEBEC CITY, March 17, 2015 /PRNewswire/ - Aeterna Zentaris Inc. (NASDAQ: AEZS) (TSX: AEZ) (the "Company"), a specialty biopharmaceutical company engaged in developing and commercializing novel treatments in oncology, endocrinology and women's health, today reported financial and operating results as at and for the fourth quarter and the year ended December 31, 2014.

Research and development ("R&D") costs, net of refundable tax credits and grants, were $6.3 million and $23.7 million for the three-month period and the year ended December 31, 2014, respectively, as compared to $5.3 million and $21.3 million for the same periods in 2013. The increase for the year ended December 31, 2014, as compared to the same period in 2013, is attributable to higher comparative employee compensation and benefits costs, which in turn are mainly due to the recording of R&D restructuring costs of approximately $2.5 million related to R&D staff redundancies resulting from the Company's global resource optimization program (the "Resource Optimization Program"), partly offset by lower comparative salaries, short-term employee benefits and share-based compensation costs.

Selling, general and administrative ("SG&A") expenses were $4.7 million and $13.7 million for the three-month period and the year ended December 31, 2014, respectively, compared to $2.6 million and $12.3 million for the same periods in 2013. For the three-month period ended December 31, 2014, the increase in SG&A expenses, as compared to the same period in 2013, is mainly related to the deployment of the Company's contracted sales force, which is currently detailing EstroGel®, and higher comparative operating foreign exchange losses. For the year ended December 31, 2014, the increase in SG&A expenses, as compared to the same period in 2013, is mainly related to higher comparative operating foreign exchange losses, the ramping up of the Company's pre-commercialization activities, the deployment of its contracted sales force related to its co-promotion activities and to the recording of restructuring costs related to administrative staff redundancies resulting from the Resource Optimization Program.

Net income (loss) for the three-month period and the year ended December 31, 2014 was $4.2 million and $(16.6) million, or $0.06 and $(0.28) per basic and diluted share, respectively, as compared to $(8.2) million and $6.8 million, or $(0.22) and $0.24 per basic and diluted share, for the same periods in 2013. The increase in net income for the three-month period ended December 31, 2014, as compared to the same period in 2013, is due largely to higher comparative net finance income, offset partially by higher comparative operating expenses and by lower net income from discontinued operations. The decrease in net income for the year ended December 31, 2014, as compared to the same period in 2013, is due largely to the higher loss from operations and to lower net income from discontinued operations, partially offset by higher comparative net finance income.

Cash and cash equivalents totaled $34.9 million as at December 31, 2014, as compared to $43.2 million as at December 31, 2013.

David Dodd, Aeterna Zentaris Chairman and CEO, commented, "During 2014, we achieved significant progress in the implementation of our strategy of transitioning into a commercially operating specialty biopharmaceutical company, as we put our commercial structure in place, built a full-time contract sales force of 19 representatives, signed a co-promotion agreement with ASCEND and started selling its product EstroGel® in our specific territories in the US. We are continuing to evaluate potential in-licensing and/or acquisition opportunities, as well as additional co-promotional arrangements related to marketed products, in order to grow our commercial activities. We are also proud of our collaboration agreement for our lead oncology compound, zoptarelin doxorubicin, with Sinopharm A-Think for China, one of the largest markets in the world. With regards to our ZoptEC Phase 3 study in endometrial cancer with zoptarelin doxorubicin, we are very pleased with the progress of patient recruitment as we now have over 400 patients enrolled in the trial out of an expected total of 500, which is in line with our projections. Therefore, we expect that at this rate, a first interim analysis of the trial should be secured in the first half of the current year, and patient recruitment should be completed by year-end. As for Macrilen, following the FDA's Complete Response Letter, we intend to make a decision in the near term on our different options for this product in the evaluation of AGHD. For 2015, we remain fully focused on becoming a growth-oriented, commercially operating specialty biopharmaceutical organization, while continuing to develop key late-stage product candidates in our existing pipeline, such as our novel targeted anticancer agent, zoptarelin doxorubicin."

Dennis Turpin, Chief Financial Officer of the Company added, "With our cash and cash equivalents position of $34.9 million as at December 31, 2014, our controlled burn rate and the completion of our recent public offering, which resulted in net proceeds of approximately $34.5 million, the Company has a solid financial position upon which it can advance its strategic initiatives."

2014 Highlights

Commercial Developments

  • During the fourth quarter, pursuant to the co-promotion services agreement signed with ASCEND Therapeutics US LLC ("ASCEND") in August 2014, the Company's own full-time contract sales force of 19 sales representatives started the field selling of  EstroGel®, ASCEND's leading non-patch transdermal hormone replacement therapy product, in specific agreed upon US territories, in exchange for a sales commission.

Product Candidate Developments

Zoptarelin Doxorubicin

  • During the year, site initiation was completed, with over 120 sites currently in operation in North America, Europe and Israel for the ZoptEC (Zoptarelin doxorubicin in Endometrial Cancer) Phase 3 trial in women with locally advanced, recurrent or metastatic endometrial cancer. To date, over 400 of the expected 500 patients have been entered into the trial.
  • On December 1, 2014, the Company entered into a master collaboration agreement with Sinopharm A-Think Pharmaceuticals Co., Ltd. ("Sinopharm"), for the development, manufacture and commercialization of zoptarelin doxorubicin in the People's Republic of China, including Hong Kong and Macau. Aeterna Zentaris received a onetime, non-refundable payment of $1.1 million transfer fee from Sinopharm, and will be entitled to receive additional consideration upon achieving certain pre-established milestones, including certain regulatory and commercial events, as well as royalties on future net sales of zoptarelin doxorubicin in China.

Macrilen

  • On November 6, 2014, the FDA issued a Complete Response Letter ("CRL") for the Company's New Drug Application ("NDA") for Macrilen in the evaluation of adult growth hormone deficiency ("AGHD"). Based on its review, the FDA determined that the NDA could not be approved in its form, as submitted. To demonstrate the efficacy of macimorelin as a diagnostic test for growth hormone deficiency, the CRL states that a new, confirmatory clinical study will be necessary. The CRL also stated that a serious event of electrocardiogram QT interval prolongation occurred for which attribution to drug could not be excluded. Therefore a dedicated thorough QT study to evaluate the effect of macimorelin on the QT interval would be necessary.
  • The Company intends to make a decision regarding the future development of Macrilen in the near term, taking into account various considerations, including prior and upcoming discussions with the FDA.

Corporate Developments

Establishment of Global Commercial Operations and Resource Optimization

  • On May 5, 2014, the Company announced it had selected Charleston, South Carolina, as the new location for its North American business and global commercial operations.
  • On August 7, 2014, the Company's Nominating, Governance and Compensation Committee approved its Resource Optimization Program, as part of its strategy to transition into a commercially operating specialty biopharmaceutical organization. The Resource Optimization Program, the goal of which is to streamline R&D activities and increase commercial operations and flexibility, is expected to result in the termination of 30 employees, with employee departures continuing through August 31, 2015. The Company expects that overall annualized savings upon completion of the Resource Optimization Program will amount to approximately $2.3 million. Total restructuring costs associated with the Resource Optimization Program recorded during 2014 were approximately $2.5 million.

Public Offerings

  • On January 14, 2014, the Company completed a public offering of 11.0 million units, generating net proceeds of approximately $12.2 million, with each unit consisting of one common share and 0.80 of a warrant to purchase one common share, at a purchase price of $1.20 per unit.
  • Subsequent to year-end, on March 11, 2015, the Company completed a public offering of 59,677,420 units, generating net proceeds of approximately $34.5 million, from which the Company paid approximately $5.7 million to the holders of approximately 21.1 million outstanding warrants issued by the Company in previous public offerings as consideration for their agreement to immediately terminate the warrants. Each unit of this March 11, 2015 public offering consists of either one common share or one warrant to purchase one common share ("Series C Warrant"), 0.75 of a warrant to purchase one common share ("Series A Warrant") and 0.50 of a warrant to purchase one common share  ("Series B Warrant"), at a purchase price of $0.62 per unit. The Series A Warrants are exercisable for a period of five years at an exercise price of $0.81 per share. The Series B warrants are exercisable for a period of 18 months at an exercise price of $0.81 per share. Total gross proceeds payable to the Company in connection with the exercise of the Series C Warrants have been pre-paid by investors and therefore are included in the aforementioned proceeds.

"At-the-Market" Issuance Program

  • Between July 1, 2014 and December 31, 2014, the Company issued a total of approximately nine million common shares under its At-the-Market ("ATM") sales agreement entered into May 2014 with MLV & Co. LLC (the "May 2014 ATM Program"), at an average price of $1.36 for aggregate gross proceeds of approximately $12.2 million, less cash and non-cash transaction costs of approximately $0.4 million.

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