PART I [Key Information](index=7&type=section&id=Item%203.%20Key%20Information) Provides selected historical financial data and comprehensive risk factors, such as operating losses and product dependence [Selected Financial Data](index=7&type=section&id=A.%20Selected%20financial%20data) Presents audited consolidated financial data for 2014-2018, prepared under IFRS, with no dividends declared - The selected financial data is derived from audited consolidated financial statements prepared in accordance with **International Financial Reporting Standards (IFRS)** as issued by the IASB. The company has declared or paid **no dividends** during the periods presented[9](index=9&type=chunk)[10](index=10&type=chunk) Consolidated Statements of Comprehensive Income (Loss) Information (2014-2018) | Indicator | 2018 ($) | 2017 ($) | 2016 ($) | 2015 ($) | 2014 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | 26,881 | 923 | 911 | 545 | 11 | | **Income (loss) from operations** | 9,842 | (23,074) | (29,476) | (34,884) | (37,395) | | **Net (loss) income** | 4,187 | (16,796) | (24,959) | (50,143) | (16,564) | | **Comprehensive (loss) income** | 4,120 | (17,532) | (25,869) | (47,790) | (19,555) | | **Basic Net (loss) income per share** | 0.25 | (1.12) | (2.41) | (18.14) | (28.06) | | **Diluted Net (loss) income per share** | 0.24 | (1.12) | (2.41) | (18.14) | (28.06) | Consolidated Statement of Financial Position Information (2014-2018) | Indicator | 2018 ($) | 2017 ($) | 2016 ($) | 2015 ($) | 2014 ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Cash and cash equivalents** | 14,512 | 7,780 | 21,999 | 41,450 | 34,931 | | **Total assets** | 25,011 | 22,195 | 31,659 | 51,498 | 47,435 | | **Shareholders' (deficiency) equity** | 1,907 | (2,783) | 6,212 | 21,615 | 14,484 | [Risk Factors](index=11&type=section&id=D.%20Risk%20factors) Identifies key risks including historical operating losses, reliance on Macrilen™, regulatory compliance, and litigation - The company has a history of operating losses, with an accumulated deficit of approximately **$310 million** as of December 31, 2018. Its ability to continue as a **going concern** depends on increasing revenue and/or securing additional funding[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The company's business is heavily dependent on the successful commercialization and out-licensing of its primary product, **Macrilen™ (macimorelin)**. Failure to do so would materially harm the business[23](index=23&type=chunk)[24](index=24&type=chunk) - Aeterna Zentaris relies on third parties, currently **Novo Nordisk** (following its acquisition of rights from Strongbridge), for the commercialization of **Macrilen™** in the U.S. and Canada. Potential revenue is largely contingent on their performance[34](index=34&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk) - The company is subject to stringent ongoing government regulation for its products, and failure to comply with requirements from bodies like the **FDA** and **EMA** could result in significant sanctions, penalties, or withdrawal of approvals[46](index=46&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk) - The company is a defendant in a **securities class-action lawsuit** alleging false and misleading statements regarding Macrilen™ between 2011 and 2014. While the company considers the claims to be without merit, an adverse outcome could materially affect its financial position[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - The company's common shares are at risk of being **delisted** from **NASDAQ** or **TSX** if they fail to meet continuing listing requirements, such as maintaining a minimum bid price of **$1.00 per share** on NASDAQ[130](index=130&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk) [Information on the Company](index=43&type=section&id=Item%204.%20Information%20on%20the%20Company) Details Aeterna Zentaris's history, Macrilen™-focused strategy, product pipeline, competitive landscape, and IP [History and Development of the Company](index=43&type=section&id=A.%20History%20and%20development%20of%20the%20Company) Outlines the company's incorporation, key acquisitions, share consolidation, and stock exchange listings - Aeterna Zentaris Inc. was incorporated on **September 12, 1990**, under the Canada Business Corporations Act. It acquired **Zentaris AG** in 2002, which became its German subsidiary (AEZS Germany) responsible for drug development[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - On November 17, 2015, the company executed a **100-to-1 share consolidation** (reverse stock split)[156](index=156&type=chunk) - The company's common shares are listed on both the **NASDAQ Capital Market** and the **Toronto Stock Exchange (TSX)** under the symbol "**AEZS**"[157](index=157&type=chunk) [Business Overview](index=46&type=section&id=B.%20Business%20overview) Describes the company's core strategy, focusing on Macrilen™ development, regulatory approvals, and commercialization - The company's primary business strategy is the development, manufacturing, registration, and commercialization of **Macrilen™ (macimorelin)**, an oral diagnostic test for **Adult Growth Hormone Deficiency (AGHD)**, through out-licensing agreements[160](index=160&type=chunk) - **Macrilen™** received **FDA marketing approval** on **December 20, 2017**, and **EMA marketing authorization** on **January 16, 2019**, for the diagnosis of AGHD[181](index=181&type=chunk)[184](index=184&type=chunk) - On January 16, 2018, the company entered into a **License and Assignment Agreement** with **Strongbridge Ireland Limited** for the commercialization of Macrilen™ in the U.S. and Canada. These rights were subsequently sold by Strongbridge to **Novo Nordisk A/S** on December 19, 2018[182](index=182&type=chunk)[186](index=186&type=chunk) - The company discontinued the development of its oncology drug candidate, **Zoptrex™ (zoptarelin doxorubicin)**, in **May 2017** after its pivotal **Phase 3 ZoptEC study** failed to meet its primary endpoint[194](index=194&type=chunk) - The company holds **worldwide rights** to **macimorelin** through an exclusive license agreement. Key patents covering the compound and its method of use expire between **2021 and 2027** in the U.S., Europe, and other jurisdictions[228](index=228&type=chunk)[231](index=231&type=chunk) [Operating and Financial Review and Prospects](index=66&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Analyzes financial condition and operating results, highlighting Macrilen™ license impact on 2018 revenue and 2019 outlook [Operating Results](index=71&type=section&id=A.%20Operating%20results) Compares fiscal years 2018 and 2017 financial performance, detailing revenue drivers, cost changes, and quarterly results Comparison of Fiscal Years 2018 and 2017 (in thousands of U.S. dollars) | Metric | 2018 | 2017 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $26,881 | $923 | +$25,958 | Primarily due to the $24.3M license fee from the Macrilen™ agreement | | **R&D Costs** | $2,932 | $10,704 | -$7,772 | Decrease due to the discontinuation of the Zoptrex™ study and focus on the less costly PIP study for Macrilen™ | | **Selling Expenses** | $3,109 | $5,095 | -$1,986 | Termination of the North American sales team and co-promotion activities in late 2017 | | **Net Income (Loss)** | $4,187 | ($16,796) | +$20,983 | Driven by the significant increase in revenue and reduction in operating expenses | - In 2018, the company incurred **$1.4 million** in settlement costs related to lawsuits with former executives and a former sales agent, which was not present in 2017[281](index=281&type=chunk) 2018 Quarterly Results (in thousands, except per share data) | Quarter | Revenues ($) | Net Income (Loss) ($) | Net Income (Loss) per Share [basic] ($) | | :--- | :--- | :--- | :--- | | **Q1 2018** | 24,658 | 14,424 | 0.88 | | **Q2 2018** | 168 | (2,602) | (0.16) | | **Q3 2018** | 663 | (2,509) | (0.15) | | **Q4 2018** | 1,392 | (5,126) | (0.31) | [Liquidity and Capital Resources](index=80&type=section&id=B.%20Liquidity%20and%20capital%20resources) Examines the company's liquidity sources, cash position, and management's assessment of future funding needs - The company's primary source of liquidity in 2018 was the **$24.0 million** upfront payment from the **Macrilen™ license agreement**. As of December 31, 2018, cash and cash equivalents were **$14.5 million**[307](index=307&type=chunk)[309](index=309&type=chunk) - Management believes it has **sufficient liquidity** to fund operations and planned expenses for at least the **next twelve months** from the report's issuance date, supported by existing cash and expected royalty income[309](index=309&type=chunk)[310](index=310&type=chunk) Consolidated Cash Flow Summary (in thousands of U.S. dollars) | Activity | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Net cash from operating activities** | 6,825 | (22,913) | (29,010) | | **Net cash from financing activities** | — | 8,030 | 9,924 | | **Net cash from investing activities** | (35) | 307 | (314) | | **Net change in cash** | 6,732 | (14,219) | (19,451) | | **Cash at end of period** | 14,512 | 7,780 | 21,999 | [Trend Information](index=85&type=section&id=D.%20Trend%20information) Outlines the 2019 outlook, focusing on Macrilen™ commercialization, out-licensing, and strategic options - The company's **2019 outlook** is focused on the commercialization of **macimorelin** in the U.S. and Canada by its partner, **Novo Nordisk**, and pursuing out-licensing opportunities for other global territories[340](index=340&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - On **March 12, 2019**, the board formed a **Special Committee** to review **strategic options**, including licensing, monetization of macimorelin, or a potential sale of the company[343](index=343&type=chunk) 2019 Operating Expenditure Forecasts | Expense Category | Forecasted Amount (USD) | | :--- | :--- | | **Research and Development Costs** | Up to $2.0 million | | **General and Administrative Expenses** | $6.5 million to $7.5 million | [Directors, Senior Management and Employees](index=89&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) Details the company's leadership, including Board members, senior management, compensation, and employee base [Directors and Senior Management](index=90&type=section&id=A.%20Directors%20and%20senior%20management) Identifies key leadership positions as of March 29, 2019, including CEO, CFO, and Chair of the Board - As of **March 29, 2019**, the company's leadership included **Michael V. Ward** as **President and Chief Executive Officer**, **Leslie Auld** as **Senior Vice President, Chief Financial Officer**, and **Carolyn Egbert** as **Chair of the Board of Directors**[353](index=353&type=chunk) [Compensation](index=96&type=section&id=B.%20Compensation) Outlines executive compensation, including director retainers and summary compensation for named executive officers - The executive compensation program is designed to be market-based and competitive, targeting the **50th percentile** for small-cap biopharmaceutical companies. It comprises base salary, an annual performance-based bonus, and long-term equity incentives[382](index=382&type=chunk)[385](index=385&type=chunk) 2018 Annual Retainers for Outside Directors | Position | Annual Retainer ($) | | :--- | :--- | | **Chair of the Board** | 80,000 | | **Board Member** | 40,000 | | **Audit Committee Chair** | 20,000 | | **Audit Committee Member** | 5,000 | | **NGCC Chair** | 15,000 | | **NGCC Member** | 3,000 | 2018 Summary Compensation for Named Executive Officers | Name and Position | Salary ($) | Option Awards ($) | Annual Incentive Plan ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Michael V. Ward**, President & CEO | 325,000 | 227,241 | 35,000 | — | 587,241 | | **James Clavijo**, Former CFO | 190,574 | 130,240 | — | 137,500 | 458,314 | | **Leslie Auld**, SVP, CFO | 62,385 | — | — | — | 62,385 | | **Richard Sachse**, Former CSO/CMO | 403,297 | — | — | — | 403,297 | | **Brian Garrison**, SVP, Global Commercial Ops | 235,015 | 3,550 | 35,000 | — | 273,565 | | **Eckhard Guenther**, VP, Alliance Mgmt | 191,242 | — | 13,154 | 3,298 | 207,694 | [Employees](index=120&type=section&id=D.%20Employees) Provides a breakdown of the company's workforce by location and functional area as of December 31, 2018 - As of December 31, 2018, the company had **22 active employees**. Of these, **18** were based in Frankfurt, Germany, and **4** in the United States, with the CFO based in Canada[459](index=459&type=chunk) - The workforce is primarily engaged in R&D (**12 employees**), commercial operations (**4 employees**), and administration (**6 employees**)[459](index=459&type=chunk) [Major Shareholders and Related Party Transactions](index=121&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) Identifies major shareholders, with J. Goldman & Co., L.P. holding over 5%, and confirms no significant related party transactions - As of **March 29, 2019**, **J. Goldman & Co., L.P.** and its affiliates were the only major shareholders, beneficially owning **997,494 common shares**, which represents **6.07%** of the outstanding shares[462](index=462&type=chunk)[463](index=463&type=chunk) - As of **March 7, 2019**, approximately **99.8%** of the company's outstanding common shares were held by two registered holders with addresses in the United States, primarily in broker "street names"[466](index=466&type=chunk) [Financial Information](index=124&type=section&id=Item%208.%20Financial%20Information) Confirms the location of full consolidated financial statements and reports no significant changes since their issuance - The full consolidated financial statements are presented under **Item 18** of this Annual Report on Form 20-F[469](index=469&type=chunk) - **No significant changes** have occurred since the date of the annual consolidated financial statements included in this report[470](index=470&type=chunk) [The Offer and Listing](index=124&type=section&id=Item%209.%20The%20Offer%20and%20Listing) Details the company's common share listings on NASDAQ and TSX, including historical high and low closing prices Common Share Price History (High/Low Closing Prices) | Period | NASDAQ (US$) High | NASDAQ (US$) Low | TSX (CAN$) High | TSX (CAN$) Low | | :--- | :--- | :--- | :--- | :--- | | **2018** | 3.87 | 1.19 | 5.10 | 1.53 | | **2017** | 3.65 | 0.84 | 4.81 | 1.13 | [Additional Information](index=125&type=section&id=Item%2010.%20Additional%20Information) Provides supplementary corporate, legal, and financial details, including articles, material contracts, and shareholder tax [Memorandum and Articles of Association](index=126&type=section&id=B.%20Memorandum%20and%20articles%20of%20association) Details the company's governing act, authorized share capital, shareholder rights plan, and advance notice provisions - The company is governed by the **Canada Business Corporations Act (CBCA)**. Its authorized share capital consists of an **unlimited number of Common Shares** and two classes of Preferred Shares (First and Second), issuable in series[475](index=475&type=chunk)[491](index=491&type=chunk) - The company has an amended and restated **shareholder rights plan**, approved in **2016** and updated in **2019**, designed to ensure fair treatment of all shareholders in the event of an unsolicited take-over bid[497](index=497&type=chunk)[500](index=500&type=chunk) - The bylaws include an **advance notice provision** requiring shareholders to provide timely notice (**30-65 days** before an annual meeting) for director nominations[538](index=538&type=chunk)[539](index=539&type=chunk) [Material Contracts](index=144&type=section&id=C.%20Material%20contracts) Summarizes key agreements, including the Macrilen™ license agreement with Novo Nordisk and executive employment contracts - The key material contract is the **License and Assignment Agreement** for **Macrilen™ (macimorelin)** in the U.S. and Canada, originally with Strongbridge and now held by **Novo Nordisk**. The agreement provides for a **15-18% royalty** on net sales, plus potential commercial milestones ranging from **$4 million to $100 million**[552](index=552&type=chunk)[553](index=553&type=chunk)[554](index=554&type=chunk) - The company has **employment and change of control agreements** with its Named Executive Officers, which include provisions for **severance payments** upon termination without cause or for good reason following a change of control[568](index=568&type=chunk)[571](index=571&type=chunk)[574](index=574&type=chunk) [Taxation](index=152&type=section&id=E.%20Taxation) Discusses U.S. and Canadian tax implications for shareholders, including Passive Foreign Investment Company (PFIC) risk - For U.S. Holders, there is a risk that the company could be classified as a **Passive Foreign Investment Company (PFIC)**. The company believes it was a PFIC in **2015** but not in **2016, 2017, or 2018**. PFIC status could result in adverse U.S. federal income tax consequences[117](index=117&type=chunk)[118](index=118&type=chunk)[612](index=612&type=chunk) - Dividends paid to non-resident holders are subject to **Canadian withholding tax** at a rate of **25%**, which may be reduced by an applicable tax treaty (e.g., to **15%** for qualifying U.S. residents under the Canada-U.S. Tax Convention)[594](index=594&type=chunk)[630](index=630&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=165&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Identifies primary market risks including share price volatility affecting warrant liability and foreign exchange risk - The company is exposed to **share price risk**, as changes in its stock price materially affect the fair value of its **warrant liability**, which is reported in the income statement. The stock price on NASDAQ ranged from **$1.19 to $3.87** during 2018[651](index=651&type=chunk)[895](index=895&type=chunk) Sensitivity of Net Income to Share Price Changes via Warrant Liability (as of Dec 31, 2018) | Change in Market Price | Impact on Net Income (in thousands of U.S. dollars) | | :--- | :--- | | **-30%** | +$1,792 | | **+30%** | -$1,504 | - The company is exposed to **foreign exchange risk** from its German subsidiary, whose functional currency is the Euro. A **10% change** in the USD/EUR exchange rate would have impacted 2018 net income by approximately **$1.1 million**[896](index=896&type=chunk) [Controls and Procedures](index=169&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Based on an evaluation as of **December 31, 2018**, the Chief Executive Officer and Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective**[654](index=654&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of **December 31, 2018**, based on the criteria established in the Internal Control – Integrated Framework (2013) by **COSO**[658](index=658&type=chunk) [Corporate Governance and Other Matters](index=171&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) Covers corporate governance, including audit committee financial expert, Code of Conduct, accountant fees, and NASDAQ compliance - The Board has determined that **Mr. Gérard Limoges**, Chairman of the Audit Committee, qualifies as an "**audit committee financial expert**"[663](index=663&type=chunk) - The company is not in compliance with the **NASDAQ quorum requirement** of **33 1/3%** for shareholder meetings, as its bylaws set the quorum at **10%**. It benefits from a **home country practice exemption** as this complies with Canadian law and TSX rules[673](index=673&type=chunk) Principal Accountant Fees (PricewaterhouseCoopers LLP) | Fee Category | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | **Audit Fees** | 563,558 | 506,309 | | **Audit-related Fees** | 37,663 | 113,430 | | **Tax Fees** | 36,224 | 5,426 | | **All Other Fees** | 0 | 0 | PART III [Financial Statements](index=176&type=section&id=Item%2018.%20Financial%20Statements) Presents audited consolidated financial statements for 2016-2018, prepared under IFRS, including key financial statements Consolidated Statement of Financial Position (in thousands of U.S. dollars) | | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | **Total current assets** | 16,256 | 9,381 | | **Total Assets** | 25,011 | 22,195 | | **Total current liabilities** | 5,596 | 5,769 | | **Total Liabilities** | 23,104 | 24,978 | | **Total shareholders' equity (deficiency)** | 1,907 | (2,783) | Consolidated Statement of Comprehensive Income (Loss) (in thousands of U.S. dollars) | | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Total revenues** | 26,881 | 923 | 911 | | **Gross income** | 24,777 | 923 | 911 | | **Total operating expenses** | 14,935 | 23,997 | 30,387 | | **Income (loss) from operations** | 9,842 | (23,074) | (29,476) | | **Net income (loss)** | 4,187 | (16,796) | (24,959) | | **Comprehensive income (loss)** | 4,120 | (17,532) | (25,869) | Consolidated Statement of Cash Flows (in thousands of U.S. dollars) | | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Net cash from operating activities** | 6,825 | (22,913) | (29,010) | | **Net cash from financing activities** | — | 8,030 | 9,924 | | **Net cash from investing activities** | (35) | 307 | (314) | | **Cash and cash equivalents – end of year** | 14,512 | 7,780 | 21,999 | [Exhibits](index=253&type=section&id=Item%2019.%20Exhibits) Indexes all exhibits, including corporate governance documents, material contracts, and Sarbanes-Oxley certifications - The exhibit list includes key corporate governance documents, such as the **Restated Articles of Incorporation (1.1)**, **Amended and Restated By-Law One (1.4)**, and the **Shareholder Rights Plan Agreement (2.1)**[917](index=917&type=chunk) - Material contracts filed as exhibits include the **2018 Long-Term Incentive Plan (4.2)**, the **License and Assignment Agreement for Macrilen™ (4.3)**, and various **executive employment agreements (4.4-4.8)**[917](index=917&type=chunk)