AEterna Zentaris Inc. (USA) (NASDAQ:AEZS) reported financial and operating results for the third quarter ended September 30, 2017.
Third Quarter 2017 Highlights:
- Macimorelin development progressing toward completion with Prescription Drug User Fee Act date of December 30, 2017;
- Company prepares for the U.S. Food and Drug Administration (“FDA”) approval and Q1 2018 target commercial launch date;
- Jeffrey A. Whitnell joins as Interim Chief Financial Officer;
- Stifel, Nicolaus & Company, Incorporated retained as strategic advisors;
- Cash on hand of $12.2 million of unrestricted cash and cash equivalents at quarter-end sufficient to take Macrilen™ through approval and no third-party debt;
- Company adopts disciplined business model focused on cost containment through zero-based budgeting and preserving cash reserves for Macrilen™ product launch.
“We are continuing our laser focus on preparation for the FDA approval of Macrilen™ by December 30, 2017, which will be the only FDA-approved drug for assessing adult growth hormone deficiency in the United States,” said Michael V. Ward, Aeterna Zentaris, Chief Executive Officer. “Our goal is to launch the product in the first quarter of 2018. The Company has reached an important point in its evolution with Jeff Whitnell joining us as the Interim Chief Financial Officer and retention of Stifel Nicolaus during the quarter. We are making progress building out a stronger management team and adopting a disciplined process for strategic review of plans, resources and opportunities. Going forward, we will continue to demonstrate our commitment to ensure that we optimize the use of resources and capital and best position the Company to maximize shareholder value.”
“I am pleased at this time to report that we are almost $2 million dollars ahead in cash reserves of where we thought we would be at this time due to our disciplined new business model that focuses on cost containment realized through zero-based budgeting, said Jeff Whitnell, Interim Chief Financial Officer, Aeterna Zentaris. “These cash reserves position us to take Macrilen™ through approval.”
Third Quarter Financials
All Amounts are in U.S. Dollars
Revenues were $241,000 and $745,000 for the three and nine months ended September 30, 2017, as compared to $269,000 and $607,000 for the same periods in 2016. The year-to-date increase is mainly explained by the expanded contract with Armune BioScience, Inc. (APIFINY®), which was effective June 1, 2016 and the amortization of the up-front payment received in connection with one of the out-licensing agreements that we entered into in the third quarter of 2016 for ZoptrexTM.
Research and Development (“R&D”) costs
R&D costs were $4.1 million and $10.2 million for the three and nine months ended September 30, 2017, compared to $4.5 million and $11.9 million for the same periods in 2016. R&D costs decreased for the three-month and nine-month periods ended September 30, 2017. The decrease in our R&D costs is mainly attributable to lower comparative third-party costs partially offset by the recording, in the third quarter of 2017, of a provision in connection with the Restructuring Program.
Third-party costs attributable to Zoptrex™ decreased during the three and nine months ended September 30, 2017, as compared to the same period in 2016, mainly due to the fact that we closed out the study and related activities in the second quarter following the negative ZoptrexTM top-line results on May 1, 2017. The negative costs for the three-month period ended September 30, 2017 are mainly explained by lower close out costs as compared to the accrual made in the second quarter.
Third-party costs attributable to Macrilen™ decreased during the three and nine months ended September 30, 2017, as compared to the same period in 2016. This is mainly due to the fact that we completed the Phase 3 clinical trial at the end of 2016. The costs incurred in 2017 related to the detailed analysis of the top-line results as well as the preparation of the New Drug Application (“NDA”) filing which was submitted on June 30, 2017. The cost incurred in the third quarter of 2017 are explained mainly by the close out costs as well as additional analysis required by the FDA.
General and Administrative (“G&A”) Expenses
G&A expenses were $1.7 million and $5.4 million for both the three and nine-month periods ended September 30, 2017, as compared to $1.6 million and $5.4 million for the same periods in 2016. The G&A expenses were in-line with our expectations.
Selling expenses were $1.7 million and $4.6 million for the three and nine months ended September 30, 2017, as compared to $1.8 million and $5.2 million for the same periods in 2016. Selling expenses for the three and nine months ended September 30, 2017 and 2016 represent mainly the costs of our sales force related to co-promotion activities as well as our sales management team. The decrease in selling expenses is explained by the reduction in the number of sales representatives from 20 to 13 since February 2017. In July 2017, we further reduced the number of sales representative to 10 and we reduced our headcount by one sales manager. Following the creation of the Strategic Review Committee, the board of directors of the Company is currently evaluating options to be ready to promote Macrilen™ quickly following the expected approval.
Net Finance (Costs) Income
Net finance (costs) income was $(2.4) million and $3.2 million for the three and nine months ended September 30, 2017, as compared to $1.6 million and $5.1 million, for the same periods in 2016. The decrease in finance income is mainly attributable to the change in fair value recorded in connection with our warrant liability. Such change in fair value results from the periodic "mark-to-market" revaluation, via the application of option pricing models, of outstanding share purchase warrants. The closing price of our common shares, which, on the NASDAQ, fluctuated from $0.84 to $3.65 during the nine-month period ended September 30, 2017, compared to $2.67 to $4.40 during the same period in 2016, also had a direct impact on the change in fair value of warrant liability.
Net loss for the three and nine months ended September 30, 2017 was $9.6 million and $16.3 million (or $0.61 and $1.13 per share), as compared to a net loss of $6.1 million and $16.7 million (or $0.61 and $1.68 per share) for the same periods in 2016. The increase in net loss for the three-month period ended September 30, 2017 is mainly explained by the change in fair value of the warrant liability due to the increase in the share price since June 30, 2017. However, the loss per share during the same period remained stable due to the increase in the weighted average number of shares due to a share issuance done in November 2016 and “at-the-market” issuances done in 2017. The increase in the weighted average number of shares also explains the decrease in the loss per share for the nine-month period.
Cash and cash equivalents were $12.2 million as at September 30, 2017, as compared to $22.0 million as at December 31, 2016. The decrease in cash and cash equivalents as at September 30, 2017, as compared to December 31, 2016, is due to the net cash used in operating activities including variations in components of our working capital. The decrease was partially offset by the net proceeds generated by the issuance of common shares under our various “at-the-market” programs.
Shares of Aeterna Zentaris closed today at $1.90, up $0.01 or 0.53%. AEZS has a 1-year high of $4.25 and a 1-year low of $0.78. The stock's 50-day moving average is $2.05 and its 200-day moving average is $1.65.
On the ratings front, Maxim analyst Jason Kolbert reiterated a Buy rating on AEZS, with a price target of $4.00, in a report issued on August 11. The current price target implies an upside of 111% from current levels. According to TipRanks.com, Kolbert has a yearly average loss of 9.2%, a 33% success rate, and is ranked #4640 out of 4707 analysts.
Æterna Zentaris operates as a specialty biopharmaceutical company that is engaged in developing and commercializing novel treatments in oncology, endocrinology and women's health. The company's pipeline encompasses compounds at all stages of development, from drug discovery through to marketed products. It focuses on the development of Perifosine, Cetrotide, Ozarelix, AEZS-108 and AEZS-130.
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