Dr. Klaus Paulini reports

AETERNA ZENTARIS REPORTS THIRD QUARTER 2020 FINANCIAL RESULTS AND PROVIDES BUSINESS UPDATE

Aeterna Zentaris Inc. has released its financial and operating results for the third quarter ended Sept. 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 remain focused on advancing our strategy in order to unlock the company's full potential. Looking to the remainder of the year, we are executing on the preparations for our pivotal phase 3 safety and efficacy study, AEZS-130-P02 (study P02), to evaluate macimorelin for the diagnosis of childhood-onset growth hormone deficiency and expect to commence this study in the first quarter of 2021," commented Dr. Klaus Paulini, chief executive officer of Aeterna. "Additionally, we continue to evaluate macimorelin for new therapeutic usages as well as assess the potential of the development candidates from our previous programs to be repurposed for alternative indications based on prior key findings from data already available to us. We look forward to providing additional updates as we explore these opportunities," added Dr. Paulini.

Recent highlights:

• Raised a total of $19-million, including a registered direct offering priced at the market under Nasdaq rules for gross proceeds of $7-million and a public offering for gross proceeds of $12-million to the company;
• Regained compliance with minimum stockholder equity requirement for continued listing on Nasdaq;
• Expanded intellectual property portfolio for macimorelin with the filing of two additional patent applications;
• Presented results of the company's first pediatric study of macimorelin at the 22nd European Congress of Endocrinology (e-ECE 2020) held Sept. 5 to Sept. 9, 2020.

Macimorelin clinical program update

The company's lead product, macimorelin, is the only U.S. Food and Drug Administration-approved oral drug indicated for the diagnosis of AGHD and is currently marketed in the United States under the trade name 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.

Preparations are under way to initiate study P02, an open-label, single-dose, multicentre and multinational study expected to enroll approximately 100 subjects worldwide, with at least 40 prepubertal and 40 pubertal subjects and a minimum of 25 subjects expected to be enrolled in the United States. The study design is expected to be suitable to support a claim for potential stand-alone testing, if successful.

Coming anticipated program milestones:

• Commence CGHD safety and efficacy study, study P02 (multinational, including the United States);
• Advance business development efforts toward securing a potential marketing partner for macimorelin for the diagnosis of AGHD in Europe and other key markets.

Aeterna has also begun exploring the potential therapeutic use of macimorelin in various other indications. The company plans to evaluate the development of alternative formulations or administration routes with the goal of ensuring sufficient bioavailability and expects to provide updates on its progress as results become available over the course of the next several months.

Pipeline expansion opportunities

Aeterna Zentaris intends to balance risks and secure growth opportunities by re-establishing a diversified, yet focused, development pipeline to which the company can best leverage its expertise and experience. The company is focused on opportunistically utilizing its network with universities in Europe and the United States, which provides, what the company believes will be, vital access to innovative development candidates in different indications, with a focus on rare or orphan indications and potential for pediatric use.

Financings completed during the third quarter of 2020

On July 7, 2020, the company closed a public offering of 26,666,666 units at a price to the public of 45 cents per unit for gross proceeds of $12-million, before deducting placement agent fees and other offering expenses payable by the company, in the amount of $1.4-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 with an exercise price of 45 cents per share expiring July 7, 2025, and 1,866,667 placement agent warrants with an exercise price of 56.25 cents per share expiring July 1, 2025, were issued.

On Aug. 5, 2020, the company closed 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 56.325 cents per common share in a registered direct offering priced at the market under Nasdaq rules. The offering resulted in gross proceeds of $7-million. Concurrently, the company 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 5.5 years, exercisable immediately following the issuance date and have an exercise price of 47 cents per common share. In addition, the company issued unregistered warrants to the placement agent to purchase up to an aggregate of 869,952 common shares, with an exercise price of 70.40625 cents per share and an expiration date of Aug. 3, 2025. The net cash proceeds to the company from the offering totalled $6.3-million. Effective Sept. 14, 2020, the company registered the common shares underlying the 9,320,907 investor warrants and 869,952 placement agent warrants issued on Aug. 3, 2020, by way of a registration statement, which removed the cashless exercise option for registered warrants.

As of Sept. 30, 2020, the company had approximately $21.7-million cash and cash equivalents. Based on current expectations, management believes it has sufficient capital to finance its current operations through 2023.

Summary of third quarter 2020 financial results (all amounts are in U.S. dollars)

For the three-month period ended Sept. 30, 2020, the company reported a consolidated net loss of $1.1-million, or a loss of two cents per common share (basic), as compared with a consolidated net loss of $300,000, or a loss of two cents per common share, for the three-month period ended Sept. 30, 2019. The $800,000 decline in net results is primarily from a change in fair value of warrant liability of $1.3-million, partially offset by a reduction of $200,000 in operating expenses.

Revenues

The company reported that total revenue for the three-month period ended Sept. 30, 2020, was $100,000, as compared with $300,000 for the same period in 2019, representing a decrease of $200,000. The 2020 revenue comprised $20,000 in royalty revenue (2019: $10,000), $90,000 in supply chain revenue (2019: $300,000) and $20,000 in licensing revenue (2019: $20,000).

Operating expenses

The company reported that total operating expense for the three-month period ended Sept. 30, 2020, was $1.9-million, as compared with $2.1-million for the same period in 2019, representing a decrease of $200,000. This decrease arises primarily from a $200,000 decline in general and administrative expenses, a $100,000 decline in research and development costs, and a $100,000 decline in selling expenses. The impact of the company's June, 2019, restructuring in its German subsidiary, namely for payroll and share-based compensation costs, is a key influence in the declines in general and administrative expenses, selling expenses, 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. During 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 enrolment and clinical activities.

Net finance income

The company reported net finance income for the three-month period ended Sept. 30, 2020, was $600,000, as compared with a net finance income of $1.5-million for the same period in 2019, representing a decrease of $900,000. This is primarily due to a $1.3-million lower gain in the change in fair value of warrant liability, offset by $200,000 from changes in currency exchange rates and $200,000 from other finance costs. Effective Sept. 14, 2020, the company registered the common shares underlying the 9,320,907 investor warrants and 869,952 placement agent warrants issued on Aug. 3, 2020, by way of a registration statement, which removed the cashless exercise option for registered warrants.

Consolidated financial statements and management discussion and analysis

For reference, the management discussion and analysis of financial condition and results of operations for the third quarter of 2020 as well as the company's audited consolidated financial statements as of Dec. 31, 2019, will be available on the company's website in the investors section or at the company's profile on SEDAR and EDGAR.

About Aeterna Zentaris Inc.

Aeterna Zentaris is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The company's lead product, macimorelin, is the first and only FDA- and European Commission-approved oral test indicated for the diagnosis of adult growth hormone deficiency (AGHD). Macimorelin is currently marketed in the United States under the trade name Macrilen through a licence agreement with Novo Nordisk, where Aeterna Zentaris receives royalties on sales. Aeterna Zentaris owns all rights to macimorelin outside of the United States and Canada.

Aeterna Zentaris is also leveraging the clinical success and compelling safety profile of macimorelin to develop it for the diagnosis of childhood-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.

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