FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
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Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the third quarter of 2003
AETERNA ZENTARIS INC.
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(Formerly named AEterna Laboratories Inc.)
1405, boul. du Parc-Technologique
Quebec, Quebec
Canada, G1P 4P5
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F Form 40-F X
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Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-________
DOCUMENTS INDEX
DOCUMENTS DESCRIPTION
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1. AEterna's Interim Report 2003 - Third Quarter (Q3)
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November 5, 2003
To our stockholders,
At the financial level, this quarter was marked mainly by substantial revenues
from Cetrotide(R), a marketed novel treatment for in vitro fertilization, and by
the strong growth in sales and net earnings from our subsidiary Atrium, which
acquired Chimiray/Interchemical in August of this year.
At the clinical development level, our kidney cancer Phase III trial with
Neovastat did not meet its main clinical endpoint. However, we are pursuing our
non-small cell lung cancer Phase III trial, whereby Neovastat is administered on
a first-line basis in combination with standard treatment.
In addition, many other products in oncology, endocrinology and infectious
diseases ensure a constant flow of high potential projects. Two already marketed
products are gaining new market share; Cetrotide(R), a novel treatment for IN
VITRO fertilization, and Impavido(R), sold in India as the first oral treatment
for the visceral form of leishmaniasis, better known as black fever, which can
prove life-threatening. Last July, we released positive Phase III trial results
still with Impavido(R), this time for the cutaneous form of leishmaniasis, a
severe parasitic skin disease prevalent in South America. As a matter of fact,
we are currently preparing to file for its eventual approval on that continent.
Finally, we are completing Phase II trials with Cetrorelix for uterus myoma,
endometriosis and benign prostatic hyperplasia, diseases that affect millions of
people worldwide.
Considering the scope of our pipeline, the strength of our international
partnership network, the profitability of our subsidiary Atrium and our $75
million cash position, I am confident that the Company is well positioned to
pursue its long-term growth.
THIRD QUARTER 2003 HIGHLIGHTS
o PHASE III TRIAL RESULTS FOR NEOVASTAT IN KIDNEY CANCER - In September, we
reported Phase III trial results for Neovastat in renal cell carcinoma, a
form of kidney cancer. The study involved 305 patients and did not reach
its primary endpoint, which was to increase the median survival time of
treated patients by 50%.
o POSITIVE PHASE III RESULTS FOR IMPAVIDO(R) IN CUTANEOUS LEISHMANIASIS
(PARASITIC SKIN DISEASE) - In July, we reported positive results of a Phase
III trial evaluating Impavido(R) (Miltefosine) for the treatment of
cutaneous leishmaniasis, a severe skin disease. The data showed that
patients taking Impavido(R) had a 220% better cure rate than those in the
placebo group. These favorable data enable the Company to apply for
marketing authorization in South American countries where the cutaneous
form of the disease is predominant. Impavido(R) is currently sold in India
and is the only oral cure for the life-threatening visceral form of
leishmaniasis.
o CLOSING OF A $35.6 MILLION BOUGHT DEAL - In July, we closed a $35.6 million
bought deal, issuing 4.5 million subordinate voting shares at $7.90 per
share. The net proceeds of $33.8 million of this financing will be used to
further develop the product pipeline, pursue the Company's growth strategy
and general corporate purposes.
o ACQUISITION OF CHIMIRAY/INTERCHEMICAL BY ATRIUM BIOTECHNOLOGIES - In
August, our subsidiary, Atrium, acquired 100% of all issued and outstanding
shares of Chimiray/Interchemical for E11.5 million ($18.4 million), payable
by the issuance of a long-term debt of E5 million ($8 million) and the
residual of E6.5 million ($10.4 million) in cash. Based in Paris,
Chimiray/Interchemical is focused mainly in the distribution of fine
chemicals and active ingredients. Net sales for the last twelve-month
period were approximately E35 million ($52 million). The company generated
net earnings and was cash flow positive.
On behalf of my colleagues and our Board of Directors, I thank you for your
continued interest and support.
Sincerely,
/s/ GILLES GAGNON
Gilles Gagnon, MSc, MBA
President and Chief Executive Officer
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following analysis explains the variations in the Company's results of
operations, financial condition and cash flow. It provides an update to the
discussion and analysis contained in our Annual Report of 2002. This discussion
and analysis should be read in conjunction with the information contained in
AEterna Laboratories Inc.'s interim consolidated financial statements and
related notes for the nine-month periods ended September 30, 2003 and 2002. All
figures are in Canadian dollars.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are disclosed in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section and the
annual consolidated financial statements contained in our 2002 Annual Report.
Our financial statements are prepared in accordance with the Canadian Generally
Accepted Accounting Principles (GAAP) and access to a summary of differences
between Canadian and US GAAP is possible by consulting note 20 of our annual
2002 financial statements.
RESULTS OF OPERATIONS
REVENUES
Revenues for the third quarter ended September 30, 2003 were $37.8 million
compared to $24.4 million for the same period last year. For the nine-month
period ended September 30, 2003, the consolidated revenues were $117.5 million
compared to $73.2 million in 2002. This increase for the quarter as well as for
the first nine months of the year comes from the Biopharmaceutical segment with
revenues totalling $34.7 million, as of September 30, 2003. The balance of $9.6
million comes from the Cosmetics & Nutrition (C&N) and the Distribution
segments, representing an increase of 13% compared to the same period of 2002
for these segments.
The acquisition, in December 2002, of Frankfurt-based Zentaris provided most of
the revenues in the Biopharmaceutical segment for this quarter as well as for
the nine-month period. Revenues in this segment were generated by the marketing
of Cetrotide(R) and Impavido(R), milestone payments, research and development
contract fees and the amortization of up-front payments.
The increase of revenues in the C&N and the Distribution segments is generated
by a continued growth of the C&N segment and by the acquisition, last August, of
Chimiray/Interchemical in the Distribution segment.
OPERATING EXPENSES
The cost of sales during this quarter amounted to $23.5 million compared to
$18.9 million for the same quarter in 2002. For the nine-month period ended
September 30, 2003, the cost of sales has raised from $56.3 million to $67.2
million. The gross margin totalled $8.2 million (25.7%) in the third quarter of
2003 in comparison with $5.5 million (22.7%) in 2002, representing an increase
of 47%. These costs are in direct proportion to corresponding revenues and their
percentage decreased by 3%. For the nine-month period, the gross margin has
raised from $16.8 million in 2002 to $22.2 million this year, for an increase
of 31%.
Selling, general and administrative expenses amounted to $7.5 million during
this quarter compared to $3.9 million in 2002. Regarding the nine-month period,
selling, general and administrative expenses were $19.4 million compared to
$12.1 million in 2002. This increase is attributed to the Biopharmaceutical
segment for an amount of $5.1 million, as a result of the acquisition of
Zentaris made last December. In addition, the C&N and Distribution segments
increased their selling expenses by $2 million as a result of the acquisition of
Chimiray/Interchemical as well as the increase in their sales force.
Research and Development (R&D) investments, net of R&D tax credits and grants,
amounted to $9.8 million during this quarter in comparison with $6.5 million
last year. As of September 30, 2003, net R&D investments reached $31.7 million
in comparison with $17.1 million in 2002. This increase is attributed to the
acquisition of Zentaris, whereby the net investment in R&D amounted to $4.3
million for this quarter and $15.6 million for the nine-month period ended
September 30, 2003. Therefore, the level of investment for Neovastat, our lead
antiangiogenic compound in oncology, was approximately the same as last year
since the Phase III program was actively ongoing for renal cell carcinoma and
non-small cell lung cancer during this period.
Depreciation and amortization (D&A) for this third quarter amounted to $2.3
million compared to $0.6 million in 2002. For the nine-month period ended
September 30, 2003, D&A amounted to $6.9 million compared to $1.7 million for
the same period last year. This significant increase is mainly related to the
amortization of Zentaris technologies acquired in December 2002 with an amount
of $3.8 million for the nine-month period ended September 30, 2003. The purchase
price allocation has been completed during the second quarter and an amount of
$12 million was allocated to goodwill from identified intangible assets. We
expect that the amortization expense for 2003 will increase significantly over
that of the 2002 fiscal year due to the intangible additions incurred at the end
of 2002.
The operating loss (before financial items, income tax expenses and
non-controlling expenses) amounted to $5.3 million during this quarter in
comparison with $5.5 million in 2002. For the nine-month period of 2003, the
operating loss was $7.6 million compared to $14 million in 2002 resulting in a
decrease of $6.4 million. This significant reduction is related to the increase
of gross margin within our C&N and Distribution segments, as well as to new
revenues generated by our Biopharmaceutical segment.
Interest income has decreased from $0.7 million to $0.5 million for this quarter
compared to the same quarter of 2002. The decrease for this quarter, as well as
for the nine-month period ended September 30, 2003, is primarily due to the cash
used for the Zentaris transaction, as well as to the reduction in market yield
available on short-term investments. The interest and financial expenses, for
this quarter as well as for the nine-month period, mainly include the financing
cost on the convertible term loans, the balance of purchase price settled in
March 2003 and the promissory note of $43 million reimbursed last January as
interim financing related to Zentaris' acquisition.
A net foreign exchange gain of $0.1 million was recorded during the quarter
ended September 30, 2003 as well as for last year. This gain is attributable to
the stability of the Canadian dollar over the US dollar during the last quarter.
For the nine-month period ended September 30, 2003, the net foreign exchange
loss amounted to $1.3 million compared to a loss of $0.2 million in 2002. This
loss is attributable to the effect of the strengthening Canadian dollar on our
US investment portfolio and working capital denominated in US dollars. We are
maintaining US dollar cash and cash equivalent and short-term investments to
meet our future expenditures in US dollars.
Income tax expense was $2.1 million during this quarter compared to $0.9 million
in 2002. From the beginning of the year, income tax expense amounted to $5.3
million in comparison to $3.1 million in 2002. Income tax expense relates to
profitable companies within our group.
The net loss for this quarter amounted to $9.2 million or $0.20 per share in
2003 compared to a net loss of $6.2 million or $0.15 per share for the same
quarter in 2002. For the nine-month period ended September 30, 2003, the net
loss was $18.6 million or $0.43 per share compared to $17.8 million or $0.46 per
share last year.
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Company remains strong with $75.4 million in cash
and short-term investments as at September 30, 2003. During this quarter, we
closed a bought deal financing on July 24, 2003 with the issuance of 4.5 million
subordinate voting shares at $7.90 per share. This financing will be used to
further develop our product pipeline, to pursue our growth strategy based on
strategic alliances and acquisition of new technologies and for general
corporate purposes.
During this quarter, an amount of $1.1 million was used for operating
activities. The cash flow used in investing activities amounted to $14.7 million
of which an amount of $14.4 million was used for the acquisition of
Chimiray/Interchemical and an additional portion of Unipex Finance S.A.
Furthermore, an amount of $0.3 million was used for the acquisition of
long-lived assets. The cash flow from financing activities amounted to $42
million in this quarter and is explained by the bought deal mentioned above, for
net proceeds of $34.1 million, and by the issuance of a long-term debt of $7.9
million related to the acquisition of Chimiray/Interchemical.
For the nine-month period ended September 30, 2003, an amount of $8.5 million
was used in operational activities. The cash flow used in investing activities
amounted to $18.3 million of which $17 million were used for the acquisition of
Chimiray/Interchemical and an additional portion of Unipex Finance S.A.
Furthermore, an amount of $1.3 million was used for the acquisition of
long-lived assets. The cash flow from financing activities amounted to $20.9
million as a result of inflows generated by the bought deal, the convertible
loan and the issuance of a long-term debt totalling $66.3 million, as well as
outflows for the reimbursement of the promissory note and the balance of
purchase price for an amount of $45.4 million.
RISK FACTORS
Economic and sector related risks are the same as those identified in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Company's 2002 Annual Report.
/s/ DENNIS TURPIN
Dennis Turpin, CA
Vice President and Chief Financial Officer
This report contains forward-looking statements, which are 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 the business opportunities in the pharmaceutical industry,
uncertainties related to the regulatory process and general changes in economic
conditions. Investors should consult the Company's ongoing 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 LABORATORIES INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(expressed in thousands of Canadian dollars)
AS AT AS AT
SEPTEMBER 30, DECEMBER 31,
2003 2002
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(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 60,863 $ 12,494
Short-term investments 14,504 69,040
Accounts receivable 48,437 74,840
Inventory 19,256 16,335
Prepaid expenses and deferred charges 2,362 2,041
Future income tax assets 257 1,682
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145,679 176,432
PROPERTY, PLANT AND EQUIPMENT 20,292 21,688
DEFERRED CHARGES 1,160 1,047
INTANGIBLE ASSETS 66,960 90,300
GOODWILL 53,877 24,252
FUTURE INCOME TAX ASSETS 16,440 17,249
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$ 304,408 $ 330,968
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LIABILITIES
CURRENT LIABILITIES
Promissory note $ - $ 43,000
Accounts payable and accrued liabilities 54,681 42,557
Income taxes 4,880 3,783
Balance of purchase price 929 39,690
Current portion of long-term debt 4,826 3,202
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65,316 132,232
DEFERRED REVENUES 11,993 12,438
CONVERTIBLE TERM LOANS 19,505 -
LONG-TERM DEBT 16,586 9,969
EMPLOYEE FUTURE BENEFITS 6,432 6,042
FUTURE INCOME TAX LIABILITIES 26,367 35,275
NON-CONTROLLING INTEREST 26,525 24,676
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172,724 220,632
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SHAREHOLDERS' EQUITY
SHARE CAPITAL (note 5) 187,605 153,578
CONTRIBUTED SURPLUS 7,096 854
DEFICIT (63,507) (44,864)
CUMULATIVE TRANSLATION ADJUSTMENT 490 768
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131,684 110,336
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$ 304,408 $ 330,968
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
QUARTERS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
UNAUDITED 2003 2002 2003 2002
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REVENUES
SALES $ 31,698 $ 24,407 $ 89,308 $ 73,196
License income and research contract fees 6,131 - 28,209 -
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37,829 24,407 117,517 73,196
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OPERATING EXPENSES
Cost of sales 23,543 18,864 67,156 56,350
Selling, general and administrative 7,465 3,901 19,439 12,073
Research and development costs 10,208 6,845 32,891 18,478
R&D tax credits and grants (420) (320) (1,223) (1,420)
Depreciation and amortization
Property, plant and equipment 889 536 2,611 1,365
Intangible assets 1,447 110 4,242 314
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43,132 29,936 125,116 87,160
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Operating loss (5,303) (5,529) (7,599) (13,964)
Interest income 497 729 1,660 2,012
Interest and financial expenses (1,399) (114) (3,487) (324)
Foreign exchange gain (loss) 94 84 (1,264) (184)
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LOSS BEFORE THE FOLLOWING (6,111) (4,830) (10,690) (12,460)
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INCOME TAX EXPENSE
Current (1,447) (808) (3,552) (1,773)
Future (647) (140) (1,701) (1,313)
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(2,094) (948) (5,253) (3,086)
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(8,205) (5,778) (15,943) (15,546)
GAIN (LOSS) ON DILUTION (64) 425 (64) 425
NON-CONTROLLING INTEREST (969) (869) (2,636) (2,651)
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NET LOSS FOR THE PERIOD $ (9,238) $ (6,222) $ (18,643) $ (17,772)
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BASIC AND DILUTED NET LOSS PER SHARE $ (0.20) $ (0.15) $ (0.43) $ (0.46)
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 45,253,682 40,452,019 42,993,432 38,552,019
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INTERIM CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(expressed in thousands of Canadian dollars)
NINE MONTHS ENDED JUNE 30,
UNAUDITED 2003 2002
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BALANCE - BEGINNING OF PERIOD $ 44,864 $ 19,083
Net loss for the period 18,643 17,772
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BALANCE - END OF PERIOD $ 63,507 $ 36,855
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(expressed in thousands of Canadian dollars)
QUARTERS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
UNAUDITED 2003 2002 2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (9,238) $ (6,222) $ (18,643) $ (17,772)
Items not affecting cash and cash equivalents
Depreciation and amortization 2,336 646 6,853 1,679
Future income taxes 647 139 1,701 1,313
Deferred charges 108 - 334 -
Deferred revenues (1,143) - 426 -
Accretion on convertible loans 415 - 830 -
Employee future benefits 123 - 305 18
Gain (loss) on dilution 64 (425) 64 (425)
Non-controlling interest 969 869 2,636 2,651
Stock-based compensation 55 - 55 54
Change in non-cash operating working capital items
Accounts receivable 1,505 107 (2,066) (4,869)
Inventory (1,320) (1,396) (668) (795)
Prepaid expenses 564 307 (147) (237)
Accounts payable and accrued liabilities 2,603 1,030 (1,341) 854
Income taxes 1,233 580 1,122 779
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(1,079) (4,365) (8,539) (16,750)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of promissory note - - (43,000) -
Convertible term loans - - 24,415 -
Payment of balance of purchase price - - (2,357) -
Increase in long-term debt 7,904 - 7,904 -
Repayment of long-term debt (28) (46) (87) (942)
Issuance of warrants - - - 747
Issuance of share capital, net of related expenses 34,093 (187) 34,027 54,677
Issuance of share by a subsidiary 42 2,000 42 2,000
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42,011 1,767 20,944 56,482
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments (3,490) (15,473) (18,981) (69,441)
Proceeds from short-term investments 7,613 8,656 73,518 50,122
Business acquisition (note 2) (14,453) (31) (17,042) (1,348)
Purchase of a product line - (27) - (212)
Purchase of property, plant and equipment (135) (1,082) (885) (3,978)
Additions to intangible assets (146) (139) (411) (268)
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(10,611) (8,096) 36,199 (25,125)
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NET CHANGE IN CASH AND CASH EQUIVALENTS 30,321 (10,694) 48,604 14,607
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 13 398 (235) 698
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 30,529 37,595 12,494 11,994
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 60,863 $ 27,299 $ 60,863 $ 27,299
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ADDITIONAL INFORMATION
Interest paid $ 120 $ 56 $ 274 $ 160
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Income taxes paid $ 2,082 $ 1,043 $ 4,024 $ 1,292
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
UNAUDITED
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1 BASIS OF PRESENTATION
These unaudited interim financial statements as at September 30, 2003 and for
the periods ended September 30, 2003 and 2002, are unaudited. They have been
prepared by the Company in accordance with Canadian generally accepted
accounting principles (GAAP) for interim financial information. In the opinion
of management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows for these periods have been
included.
The accounting policies and methods of computation adopted in these financial
statements are the same as those used in the preparation of the Company's most
recent annual consolidated financial statements. All disclosures required for
annual financial statements have not been included in these financial
statements. These consolidated financial statements should be read in
conjunction with the Company's most recent annual consolidated financial
statements. These interim results of operations are not necessarily indicative
of the results for the full year.
2 BUSINESS ACQUISITION
Unipex Finance S.A.
On January 13, May 27, and July 16, 2003, the subsidiary Atrium Biotechnologies
Inc.(Atrium) acquired 23,760 common shares of the outstanding capital stock of
Unipex Finance S.A.(Unipex) for a cash consideration of $2,843,766. In addition,
Atrium also invested in its subsidiary by acquiring 70,400 treasury shares of
Unipex increasing its interest in the latter to 80.65% (70.28% in 2002). The
excess of the purchase price over the net identifiable assets on the date of
acquisition is $3,174,618 and is recorded as goodwill not deductible for income
tax purposes.
Zentaris AG
The allocation of the purchase price, following the acquisition of Zentaris'
shares in December 2002 has been completed during the second quarter. At the
acquisition date, Zentaris AG had two products developed that provided benefits
from the sale of these products. The developed technology and the in-process
research and development (R&D) were valued using a discounted cash flow approach
resulting in an allocated fair value of $66.9 M. The in-process R&D would
require further development. The goodwill related to this transaction was valued
at $12 M and, according to GAAP, it will be not amortized but tested annually
for impairment in relation to the fair value this reporting unit to which
goodwill applies.
Interchemical S.A. and Chimiray S.A.
On August 5, 2003, Unipex Finance S.A., a French subsidiary of Atrium, acquired
100 % of the issued and outstanding common shares of Interchemical S.A. and
Chimiray S.A. for a total consideration of $ 18,714,636 of which an amount of
$14,198,063 was paid cash and $ 933,492 as a balance of purchase price. These
companies are focused mainly in the distribution of fine chemicals and active
ingredients. The results of operations have been included in the statement of
operations since August 5, 2003, being the date of acquisition. The net assets
acquired at the allocated values are as follows:
AETERNA LABORATORIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
UNAUDITED
--------------------------------------------------------------------------------
$
-----------------
Current assets 17,973
Property, plant and equipment 395
Intangible assets 447
Future income tax assets 366
Current liabilities (14,927)
Long-term liabilities (1,019)
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Net identifiable assets acquired 3,235
Goodwill 15,480
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Purchase price 18,715
Less: cash and cash equivalents acquired (3,583)
balance of purchase price (934)
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Cash paid 14,198
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An independant report was issued on October 1, 2003 which confirm that no
specific identifiable assets have any material value which could be separated
from the general goodwill. The goodwill is non-deductible for income tax
purposes.
3 COMPANY'S STOCK OPTION PLAN
The company has chosen not to use the fair value method to account for
stock-based compensation costs arising from awards to employees but discloses
the pro-forma information relating to net loss and loss per share as if the fair
value method of accounting had been used.
Three months ended Nine months ended
September 30, 2003 September 30, 2003
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Net loss for the period $ (9,238) $ (18,643)
Pro-forma adjustment for stock-based compensation costs (283) (1,352)
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Pro-forma net loss for the period $ (9,521) $ (19,995)
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Basic and diluted net loss per share $ (0.20) $ (0.43)
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Pro-forma basic and diluted net loss per share $ (0.21) $ (0.47)
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The pro-forma amounts may not be representation of future disclosure as the
estimated fair value of stock options is amortized to expense over the vesting
period and additional options may be granted in future periods. Furthermore,
these pro-forma amounts include a compensation cost based on a weighted-average
grant date fair value of $2.79 and $2.13 per stock option options granted in
the three and nine months ended September 30, 2003 respectively as calculated
using the Black-Scholes option pricing model with the following assumptions:
Three months ended Nine months ended
September 30, 2003 September 30, 2003
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Annualized volatility 55% 57%
Risk-free interest rate 3.26% 3.98%
Expected life (years) 2.6 3.7
Dividend Nil Nil
AETERNA LABORATORIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
UNAUDITED
--------------------------------------------------------------------------------
4 CONVERTIBLE TERM LOANS
The company issued convertible term loans in the aggregate principal amount of
$25 million, bearing interest at an annual rate of 12%, payable annually or at
maturity at the option of the company. These term loans are secured by all
assets of the company with the exception of equipments and the shares of Atrium
Biotechnologie Inc. The term loans mature on March 31, 2006 and are convertible
at all time at the option of the holders in subordinate voting shares of the
company at a price of $ 5.05 per share. The equity component, which corresponds
to the option of the holders to convert term loans into shares of the company,
was valued at the date of the loans and is classified as contributed surplus.
5 SHARE CAPITAL
Authorized
Unlimited number of shares of the following classes:
Common: Multiple voting shares, voting and participating, ten votes per
share, convertible into one subordinate share at the option of the
holder
Subordinate voting shares, voting and participating, one vote per
share
Preferred: First and second ranking, issuable in series, with rights and
privileges specific to each class.
Issued
AS AT AS AT
SEPTEMBER 30, DECEMBER 31,
2003 2002
-------------------------------------
(UNAUDITED)
-- Multiple voting shares (4,727,100 as at December 31, 2002) $ - $ 1,862
45,330,992 Subordinate voting shares (35,961,927 as at December 31, 2002) 187,605 151,716
---------------------------------
$ 187,605 $ 153,578
---------------------------------
---------------------------------
Effective on May 29, 2003, all the multiple voting shares were converted into
the same number of subordinate voting shares.
On July 24, 2003, pursuant a bought deal, the company issued 4,500,000
subordinate voting shares at a price of $7.90 per share for a gross proceeds of
$35,550,000. Pursuant to the exercice of stock options, the company issued
141,965 subordinate voting shares.
6 SEGMENT INFORMATION
The company manages its business and evaluates performance based on three
operating segments, which are the biopharmaceutical segment, the cosmetics and
nutrition segment and the distribution segment. The accounting principles used
for these three segments are consistent with those used in the preparation of
these consolidated financial statements.
Quarters ended September 30, Nine months ended September 30,
---------------------------- -------------------------------
2003 2002 2003 2002
---------------------------- -------------------------------
REVENUES
Biopharmaceutical $ 7,932 $ - $ 34,662 $ -
Cosmetics and nutrition 4,040 3,128 10,990 9,284
Distribution 26,034 21,334 72,296 64,039
Consolidated adjustments (177) (55) (431) (127)
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$ 37,829 $ 24,407 $ 117,517 $ 73,196
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NET EARNINGS (LOSS) FOR THE PERIOD
Biopharmaceutical $ (10,470) $ (7,230) $ (21,877) $ (20,979)
Cosmetics and nutrition 744 631 1,952 2,013
Distribution 505 383 1,352 1,172
Consolidated adjustments (17) (6) (70) 22
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$ (9,238) $ (6,222) $ (18,643) $ (17,772)
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AETERNA ZENTARIS INC.
Date: August 13, 2004 By: /s/ MARIO PARADIS
--------------------- ------------------------------------------------
Mario Paradis
Senior Director, Finance and Corporate Secretary