AEterna Zentaris Reports Fourth Quarter and Full-Year 2006 Financial and Operating Results



    Year marked by success in emerging as a late-stage pure play
    biopharmaceutical company

    All amounts are in U.S. dollars

    QUEBEC CITY, March 5 /CNW Telbec/ - AEterna Zentaris Inc. (TSX: AEZ;
NASDAQ:   AEZS) today reported financial and operating results for the fourth
quarter and full year ended December 31, 2006.
    "The year 2006 was driven by the significant advancement of our lead
compounds into late-stage clinical development, while making a strategic
decision to spin-off our subsidiary Atrium Biotechnologies and leverage our
equity interest in the company. Ultimately, we were successful in reaching our
goal of emerging as a late-stage pure play biopharmaceutical company," said
Gilles Gagnon, AEterna Zentaris' President and Chief Executive Officer.
    "Our clinical trials delivered solid results across the board. Positive,
highly statistically significant Phase 2 results with our flagship, product
candidate cetrorelix in BPH led to the initiation of our Phase 3 program. We
disclosed additional positive Phase 2 results for ozarelix in both BPH and
prostate cancer and quickly initiated further Phase 2b trials in those
indications. Perifosine yielded positive Phase 2 results for multiple forms of
cancer and furthermore, we initiated several additional Phase 2 trials and
foresee the potential to initiate a Phase 3 program before year end.
    "Our earlier-stage programs also provided additional proof of our
world-class development capabilities as we disclosed positive Phase 1 results
for AN-152 in gynaecological and breast cancers and initiated a Phase 1 trial
with ZEN-012 for solid tumors. Moving forward, we have a sound financial
position and remain committed to further invest in our lead compounds and
bring them closer to market. We continue to strive to expose the depth,
breadth and potential of our robust pipeline and will diligently execute our
business plan providing opportunities to create additional value for our
shareholders," concluded Mr. Gagnon.

    KEY DEVELOPMENTS FOR THE YEAR ENDED DECEMBER 31, 2006

    CORPORATE EVOLUTION

    Spin-off of Atrium Biotechnologies - The decision by AEterna Zentaris to
sell a portion of its ownership interest in Atrium by way of secondary
offering, and to distribute its remaining interest to its shareholders
represented the culmination of a lengthy and detailed review process in which
the Company examined a number of strategic alternatives for how best to pursue
and implement its business plan of becoming a "pure play" biopharmaceutical
Company. The transaction was integral to the evolution of AEterna Zentaris as
it affords the Company the necessary financial resources to execute a very
focused strategy and emerge as a fully integrated, global specialist-driven
biopharmaceutical company with a focus on endocrine therapy and oncology.

    ADVANCING THE PIPELINE

    Cetrorelix - Early in the year, the Company regained exclusive worldwide
(ex-Japan) rights for its flagship, product candidate, cetrorelix in benign
prostatic hyperplasia (BPH). After presenting positive Phase 2 data to the
FDA, the Company announced the submission and acceptance of an Investigational
New Drug (IND) and the initiation of an extensive, 1,500-patient late-stage
Phase 3 program. Additionally, cetrorelix was the first LHRH antagonist to be
launched in Japan under the trade name Cetrotide(R) for in vitro fertilization
and is now marketed worldwide.
    Ozarelix - After expeditiously recruiting patients for Phase 2 trials in
prostate cancer and BPH, the Company, along with its partner Spectrum
Pharmaceuticals, reported positive data in both indications. An extended Phase
2b trial in prostate cancer was then initiated and subsequent to year end, a
Phase 2b trial in BPH was initiated in the United States. Moreover, the
Company granted its Japanese partner Nippon Kayaku, an exclusive license for
ozarelix for all oncological indications in Japan.
    Perifosine - Throughout the year, the Company, along with its partner
Keryx Biopharmaceuticals, announced positive data in multiple Phase 2 trials,
as well as the initiation of additional Phase 1/2 trials in multiple cancers.
Very encouraging interim data were reported from a multi-center, Phase 2 trial
showing a 43% partial response rate in patients with advanced renal cell
carcinoma. Additional positive interim Phase 2 data were reported in relapsed
and refractory multiple myeloma showing an induction of response and/or
disease stabilization in 69% of evaluable patients in combination with
dexamethasone.
    AN-152 - Positive top-line Phase 1 results for the Company's cytotoxic
conjugate, AN-152, in patients with gynaecological and breast cancers were
reported. The data showed the compound's good safety profile and established
the maximum tolerated dose (MTD) at 267 mg/m(2) which will be the recommended
dose for a Phase 2 trial. In addition to good safety data, the trial provided
a hint of efficacy as disease stabilization and regression of lesions were
observed at the 160 mg/m(2) and 267 mg/m(2) dose levels.

    SUBSEQUENT TO YEAR END

    Neovastat - The Company has decided to terminate its development program
being conducted with the National Cancer Institute (NCI) for Neovastat
(AE-941). The decision was taken following interim results of the pivotal
Phase 3 trial in non small-cell lung cancer which showed that Neovastat,
combined with induction chemotherapy and concomitant chemoradiotherapy, has
proven to be safe but did not reach the main endpoint of improving overall
patient survival by 25% compared to the placebo-control arm. Overall, there
were less patients experiencing severe side effects (more than grade 3) in the
Neovastat arm compared to the placebo arm (p=0.018).The NCI has submitted an
abstract and is awaiting acceptance by the American Society of Clinical
Oncology (ASCO) for the upcoming annual meeting in June.
    ZEN-012 - AEterna Zentaris announced the initiation of a Phase 1 trial
with its small molecule oral anti-cancer drug, ZEN-012, in patients with solid
tumors and lymphoma, after the Company's IND application was accepted by the
U.S. Food & Drug Administration (FDA) in late December 2006. This 50-patient,
open-label, dose-escalation, multi-center, intermittent treatment trial is
being conducted in the United States under the supervision of lead
investigator, Daniel D. Von Hoff, MD, Senior Investigator at the Translational
Genomics Research Institute in Phoenix, Arizona.

    CONSOLIDATED RESULTS FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2006

    (*)Please note that following the sale of a partial interest in the
Company's former subsidiary, Atrium, closed on October 18, 2006, the former
Active Ingredients & Specialty Chemicals Segment as well as the Health &
Nutrition Segment have been reclassified as discontinued operations from
January 1 to October 18, 2006 and for the years ended December 31, 2005 and
2004.

    Consolidated revenues for the fourth quarter ended December 31, 2006 were
$12.6 million, a decrease of 11.9% compared to revenues of $14.3 million for
the same period in 2005.
    Consolidated R&D expenses were $8.3 million for the fourth quarter ended
December 31, 2006 compared to $8.2 million for the same period in 2005.
    Consolidated loss from operations for the fourth quarter 2006 were
$6.8 million compared to $2 million for the same period in 2005.
    Consolidated net earnings from discontinued operations for the fourth
quarter ended December 31, 2006 were $16.8 million compared to $4.5 million
for the same period in 2005.
    The Company's consolidated net earnings were $39.1 million for the fourth
quarter of 2006, or $0.74 per basic and diluted share, compared to
$0.9 million, or $0.02 per basic and diluted share, for the same period in
2005.
    The consolidated cash and short-term investments were $61 million as of
December 31, 2006.

    CONSOLIDATED RESULTS FOR THE FULL YEAR ENDED DECEMBER 31, 2006

    Consolidated revenues for the 12-month period ended December 31, 2006
decreased by 12.3% to $41.4 million compared to $47.2 million for the same
period in 2005. The decrease in 2006 is mainly attributable to a reduction in
license revenues from the Company's collaboration with Solvay Pharmaceuticals,
partly offset by milestone payments received from a Japanese partner with
respect to the approval of Cetrotide(R) in Japan for in vitro fertilization,
and from the Company's partner, Spectrum, related to the further development
of ozarelix into Phase 2 for BPH and prostate cancer.
    Consolidated R&D expenses were $28.7 million in 2006 compared to
$27.1 million for the same period in 2005. The increase in R&D is mainly due
to additional expenses for further advancement of cetrorelix in BPH as well as
for targeted, earlier-stage development programs.
    The Company reported a consolidated loss from operations for the 12-month
period ended December 31, 2006 of $24.1 million compared to $9.6 million for
the same period in 2005. The 2006 increase in loss from operations is
attributable to a combination of lower license revenues, an increase in
non-recurring corporate expenses, additional R&D expenses, as well as
additional D&A expenses with respect to an impairment loss on non-core
pharmaceutical development projects. This 2006 increase in loss from
operations was partly offset by increased sales and royalties, as well as R&D
investment tax credits.
    Consolidated net earnings for the 12-month period ended December 31, 2006
were $33.4 million, or $0.64 per basic share and $0.62 per diluted share,
compared to $10.6 million, or $0.23 per basic share and diluted share, for the
same period in 2005. The increase of the net earnings for the 12-month period
ended December 31, 2006 is directly attributable to the recording of an income
tax recovery for an amount of $29.1 million, lower interest expense for an
amount of $5.7 million, due to the conversion of the term loans during the
first quarter of the year, as well as increased revenues representing
$1.6 million from the share in the results of an affiliated company partly
offset by increased loss from operations.

    CONFERENCE CALL

    Management will be hosting a conference call for the investment community
beginning at 10:30 a.m. Eastern Time today, Monday, March 5, to discuss fourth
quarter and full-year 2006 results, as well outline its strategy and
milestones for 2007.
    To participate in the live conference call by telephone, please dial
416-644-3417, 514-807-8791 or 800-732-6179. 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 late-stage, 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.
    

    AEterna Zentaris
    (In thousands of US dollars, except share
    and per share data)

                                   Three months ended          Year ended
    CONSOLIDATED RESULTS               December 31,           December 31,
    Unaudited                       2006        2005        2006        2005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    Revenues
    Sales and royalties            7,518       5,933      27,740      23,674
    License fees                   5,113       8,340      13,652      23,530
    -------------------------------------------------------------------------
                                  12,631      14,273      41,392      47,204
    -------------------------------------------------------------------------

    Operating expenses
    Cost of sales                  3,709       2,486      11,747       8,596
    Selling, general
     and administrative            4,335       4,156      17,235      15,281
    R&D costs                      8,283       8,198      28,652      27,075
    R&D tax credits and grants    (1,442)       (157)     (1,564)       (536)
    Depreciation and amortization  4,540       1,578       9,429       6,371
    -------------------------------------------------------------------------
                                  19,425      16,261      65,499      56,787
    -------------------------------------------------------------------------
    Loss from operations          (6,794)     (1,988)    (24,107)     (9,583)

    Interest income                  703         362       1,446       1,238
    Interest expense                (153)     (1,823)     (1,450)     (7,017)
    Foreign exchange gain (loss)     397           -         298         (88)
    Gain on disposal of a
     long-term investment            409           -         409           -
    Share in the results of
     an affiliated company         1,575           -       1,575           -
    -------------------------------------------------------------------------
    Loss before the following:    (3,863)     (3,449)    (21,829)    (15,450)
    Income tax recovery (expense) 26,163         (70)     29,129        (493)
    -------------------------------------------------------------------------
    Net earnings (loss) from
     continuing operations        22,300      (3,519)      7,300     (15,943)
    Net earnings from
     discontinued operations      16,801       4,455      26,090      26,514
    -------------------------------------------------------------------------
    Net earnings for the year     39,101         936      33,390      10,571
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss) per share
     from continuing operations
      Basic and diluted             0.42       (0.08)       0.14       (0.35)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share
      Basic                         0.74        0.02        0.64        0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted                       0.74        0.02        0.62        0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     number of shares
      Basic                   52,694,868  46,139,814  52,099,290  46,139,814
      Diluted                 53,035,786  46,139,814  52,549,260  46,139,814
    Issued and outstanding
     shares                                           53,169,470  46,139,814


    AEterna Zentaris
    (In thousands of US dollars, except share
    and per share data)

                                                        December    December
    CONSOLIDATED BALANCE SHEET                                31,         31,
    Unaudited                                               2006        2005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               $           $
    Cash and short-term investments                       61,019      34,861
    Other current assets                                  40,704     128,815
                                                        ---------------------
                                                         101,723     163,676
    Long-term assets                                     121,768     256,109
                                                        ---------------------
    Total assets                                         223,491     419,785
                                                        ---------------------
                                                        ---------------------

    Current liabilities                                   16,310      64,174
    Long-term debt                                           704       1,426
    Other long-term liabilities                           27,598     244,654
                                                        ---------------------
                                                          44,612     310,254
    Shareholders' equity                                 178,879     109,531
                                                        ---------------------
    Total liabilities and shareholders' equity           223,491     419,785
                                                        ---------------------
                                                        ---------------------
    




For further information:

For further information: Jenene Thomas, Senior Director, Investor
Relations & Corporate Communications, (418) 655-6420,
jenene.thomas@aeternazentaris.com; Paul Burroughs, Media Relations, (418)
652-8525, ext. 406, paul.burroughs@aeternazentaris.com

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