Aeterna Zentaris(AEZS) - 2022 Q1 - Quarterly Report

Condensed Interim Consolidated Financial Statements Condensed Interim Consolidated Statements of Financial Position As of March 31, 2022, total assets decreased to $76.3 million from $80.1 million, driven by reduced cash and current assets, while total liabilities also decreased to $23.2 million from $27.1 million, leading to stable shareholders' equity at $53.2 million Consolidated Statement of Financial Position (in thousands of US$) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | 67,097 | 70,820 | | Cash and cash equivalents | 63,596 | 65,300 | | Total Assets | 76,344 | 80,102 | | Total Current Liabilities | 5,666 | 7,766 | | Total Liabilities | 23,185 | 27,116 | | Total Shareholders' Equity | 53,159 | 52,986 | | Total Liabilities and Shareholders' Equity | 76,344 | 80,102 | Condensed Interim Consolidated Statements of Changes in Shareholders' Equity For Q1 2022, total shareholders' equity increased slightly to $53.2 million, driven by comprehensive income offsetting a net loss, contrasting with Q1 2021's significant equity increase from financing activities Changes in Shareholders' Equity - Q1 2022 (in thousands of US$) | Description | Amount | | :--- | :--- | | Balance - January 1, 2022 | 52,986 | | Net loss | (2,640) | | Other comprehensive income | 2,786 | | Share-based compensation costs | 27 | | Balance – March 31, 2022 | 53,159 | - In Q1 2021, the company raised significant capital, with $30.98 million from the issuance of common shares and $19.99 million from the exercise of warrants, which dramatically increased shareholders' equity[6][66] Condensed Interim Consolidated Statements of Comprehensive Income (Loss) The company reported a net loss of $2.64 million for Q1 2022, up from $1.46 million in Q1 2021, driven by increased operating expenses, particularly research and development, despite a slight revenue decrease Q1 2022 vs Q1 2021 Performance (in thousands of US$) | Metric | Q1 2022 | Q1 2021 (Restated) | | :--- | :--- | :--- | | Total Revenues | 1,517 | 1,668 | | Research and development expenses | 2,390 | 1,458 | | Total operating expenses | 4,330 | 2,997 | | Loss from operations | (2,813) | (1,329) | | Net loss | (2,640) | (1,458) | | Comprehensive income (loss) | 146 | (29) | | Net loss per share (basic and diluted) | (0.02) | (0.02) | Condensed Interim Consolidated Statements of Cash Flows In Q1 2022, net cash used in operating activities increased to $1.46 million, while financing activities used $34,000, contrasting with Q1 2021's $50.9 million cash provided by financing, leading to a $1.7 million decrease in cash and equivalents Cash Flow Summary (in thousands of US$) | Activity | Q1 2022 | Q1 2021 (Restated) | | :--- | :--- | :--- | | Net cash used in operating activities | (1,461) | (1,045) | | Net cash (used in) provided by financing activities | (34) | 50,933 | | Net cash used in investing activities | (6) | (507) | | Net change in cash and cash equivalents | (1,704) | 49,100 | | Cash and cash equivalents – End of period | 63,596 | 73,371 | - Financing activities in Q1 2021 included $34.2 million from the issuance of common shares and $19.99 million from the exercise of warrants, which were absent in Q1 2022[11][71] Notes to Condensed Interim Consolidated Financial Statements Note 1: Business Overview This note details the company's biopharmaceutical business, IFRS basis of financial statement preparation, and the impact of external factors like COVID-19 and the Russia/Ukraine conflict, which delayed the DETECT-trial into 2023 and necessitated restatement of prior period figures Summary of Business, Basis of Presentation, and Government Assistance Aeterna Zentaris is a biopharmaceutical company focused on therapeutics and diagnostics, with Macrilen™ as its lead product for AGHD, and is developing a pre-clinical pipeline for rare indications, with financial statements prepared under IFRS - The company's lead product is Macrilen™ (macimorelin), an oral test for Adult Growth Hormone Deficiency (AGHD), marketed in the US by Novo Nordisk and in Europe/UK by Consilient Healthcare[13][73] - The company is also focused on developing a pre-clinical pipeline for rare or orphan indications, with potential for pediatric use[13][73] - Financial statements are prepared in accordance with IFRS, and the company has adopted IAS 20 for accounting for government grants[14][74] COVID-19 & Russia and Ukraine Conflict The COVID-19 pandemic and Russia/Ukraine conflict have delayed the DETECT-trial's recruitment into 2023, leading to a $1.2 million reclassification of deferred revenue from current to long-term - The DETECT-trial has experienced delays in site initiation and patient enrollment due to the COVID-19 pandemic and the Russia/Ukraine conflict[16][76] - As a result of the delays, the recruitment for the DETECT-trial is now expected to continue into 2023, revised from the previous estimate of late 2022[16][76] - Due to the revised timeline, $1.2 million of deferred revenue has been reclassified from current to long-term as of March 31, 2022[16][76] Restatement of Comparative Period Figures The company restated its 2021 interim financial statements due to a re-evaluation of the DETECT-trial arrangement with Novo Nordisk, reclassifying charges from R&D expenses to development services revenue under IFRS 15 - The company restated its condensed consolidated interim financial statements for the three, six, and nine-month periods of 2021[18][78] - The restatement stemmed from a re-evaluation of the DETECT-trial activities with Novo Nordisk, which were determined to no longer be a joint operation under IFRS 11[18][78] - Consequently, charges to Novo were reclassified from research and development expenses to development services revenue, and related license fees and deferred revenues were also adjusted[18][78] Note 2: Critical Accounting Estimates and Judgements Management's preparation of financial statements requires significant judgments, estimates, and assumptions, which remain consistent with those applied in the annual financial statements for the year ended December 31, 2021 - Management is required to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses[21][81] - The critical accounting estimates and judgments applied in these interim statements are the same as those applied in the annual financial statements for the year ended December 31, 2021[22][82] Note 3: License and Supply Arrangements The company generates revenue from Macrilen™ license and supply agreements with key partners like Novo Nordisk and Consilient Health, with total deferred revenue at $5.37 million as of March 31, 2022, down from $6.31 million at year-end 2021 - The company has key licensing agreements for Macrilen™ with Novo Nordisk (U.S./Canada), Consilient Health (Europe/UK), MegaPharm (Israel), and NK Meditech (Korea)[23][24][25] Deferred Revenue from License Agreements (in thousands of US$) | Agreement | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Novo Amendment | 3,908 | 4,814 | | CH License Agreement | 1,324 | 1,358 | | NK License Agreement | 133 | 136 | | Total | 5,365 | 6,308 | Note 4: Trade and Other Receivables Trade and other receivables decreased to $693,000 as of March 31, 2022, from $1.31 million at year-end 2021, including a new $146,000 grant receivable for pre-clinical programs Trade and Other Receivables Breakdown (in thousands of US$) | Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Trade accounts receivable (net) | 302 | 877 | | Value-added tax | 193 | 372 | | Grant receivable | 146 | — | | Other | 52 | 65 | | Total | 693 | 1,314 | - In March 2022, the company was awarded a monetary subsidy of $146,000 under a German tax incentive act for R&D on a SARS-CoV-2 vaccine and a treatment for neuromyelitis optica[29][89] Note 5: Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets decreased to $1.05 million as of March 31, 2022, from $1.77 million at year-end 2021, primarily due to reductions in prepaid research and development and prepaid insurance Prepaid Expenses Breakdown (in thousands of US$) | Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Prepaid insurance | — | 421 | | Prepaid research and development | 907 | 1,329 | | Other | 143 | 22 | | Total | 1,050 | 1,772 | Note 6: Payables and Accrued Liabilities Payables and accrued liabilities slightly increased to $2.80 million as of March 31, 2022, from $2.67 million at year-end 2021, primarily comprising trade accounts payable, accrued R&D costs, and salaries Payables and Accrued Liabilities Breakdown (in thousands of US$) | Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Trade accounts payable | 1,022 | 934 | | Salaries, employment taxes and benefits | 517 | 531 | | Accrued research and development costs | 695 | 596 | | Other accrued liabilities | 561 | 611 | | Total | 2,795 | 2,672 | Note 7: Employee Future Benefits The net liability for employee future benefits decreased to $14.39 million as of March 31, 2022, from $17.49 million at year-end 2021, primarily due to a $3.19 million actuarial gain from an increased discount rate - The net liability for employee future benefits decreased from $17.49 million at Dec 31, 2021 to $14.39 million at March 31, 2022[34][94] - The reduction was largely due to an actuarial gain of $3.19 million arising from changes in financial assumptions, specifically an increase in the discount rate from 1.1% to 1.7%[34][94] Note 8: Share Capital, Warrants and Other Capital This note details the company's capital structure, highlighting $34.2 million raised from a public offering and $20.0 million from warrant exercises in Q1 2021, with 1,136,368 stock options and 423,000 DSUs outstanding as of March 31, 2022 - In February 2021, the company completed an underwritten public offering, raising aggregate gross proceeds of $34.2 million[38][39][99] - During the three months ended March 31, 2021, the exercise of 34,888,965 warrants generated aggregate proceeds of $19.99 million[41][42][101] - As of March 31, 2022, there were 1,136,368 stock options and 423,000 DSUs outstanding, with 50,000 new stock options granted during the quarter[43][103] Note 9: Operating Expenses Total operating expenses for Q1 2022 significantly increased to $4.33 million from $3.00 million in Q1 2021, primarily driven by higher research and development costs and increased employee benefits across R&D and G&A functions Operating Expenses Breakdown (in thousands of US$) | Expense Category | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | R&D - Employee benefits | 406 | 289 | | R&D - Professional services | 1,975 | 1,147 | | R&D - Government grant | (146) | — | | G&A - Employee benefits | 511 | 351 | | Total Operating Expenses | 4,330 | 2,997 | Note 10: Supplemental Disclosure of Cash Flow Information This note details changes in operating assets and liabilities affecting cash flow, showing a net positive change of $1.13 million for Q1 2022, mainly from decreases in trade receivables and prepaid expenses Changes in Operating Assets and Liabilities (in thousands of US$) | Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Trade and other receivables | 474 | 650 | | Inventory | (206) | (40) | | Prepaid expenses and other current assets | 711 | (93) | | Payables and accrued liabilities | 159 | 115 | | Deferred revenues | 8 | 1,227 | | Total | 1,126 | 1,647 | Note 11: Segment Information The company operates solely within the biopharmaceutical segment - The Company operates in a single operating segment, the biopharmaceutical segment[53][113] Note 12: Net Loss Per Share Net loss per share remained stable at ($0.02) for Q1 2022, despite an increase in weighted average shares outstanding to 121.4 million, with all stock options and warrants excluded from diluted EPS due to the net loss Net Loss Per Share Calculation (in thousands of US$) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net loss (in thousands of US$) | (2,640) | (1,458) | | Basic weighted average shares | 121,397,007 | 95,444,990 | | Diluted weighted average shares | 121,397,007 | 95,444,990 | | Net loss per share (basic & diluted) | (0.02) | (0.02) | - In periods with reported net losses, all stock options and warrants are deemed anti-dilutive and are excluded from the calculation of diluted net loss per share[56][116] Note 13: Commitments The company has total contractual commitments of $3.84 million, with $2.57 million due within one year, and potential future milestone payments of up to $41.07 million for R&D and revenue, with uncertain timing Contractual Commitments (in thousands of US$) | Period | Service and manufacturing | R&D contracts | TOTAL | | :--- | :--- | :--- | :--- | | Less than 1 year | 518 | 2,056 | 2,574 | | 1 - 3 years | 638 | 630 | 1,268 | | 4 - 5 years | 1 | — | 1 | | Total | 1,157 | 2,686 | 3,843 | - The company has potential future milestone payments of up to $8.76 million for R&D and $32.31 million for revenue, totaling $41.07 million[59][119] - The timing of milestone payments is not risk-adjusted and is based on the company's best estimate, acknowledging that pharmaceutical development is a complex and risky process[59][119]