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AEterna Zentaris: Management'S Discussion And Analysis

The following excerpt is from the company's SEC filing.

of Financial Condition and Results of Operations

Company Overview

Aeterna Zentaris Inc. is a specialty biopharmaceutical company engaged in developing and commercializing novel treatments in oncology, endocrinology and women's health.

Our drug development efforts are focused currently on two lead, clinical-stage development compounds: Zoptrex

(zoptarelin doxorubicin), which has the potential to become the first United States ("US") Food and Drug Administration ("FDA")-approved medical therapy for advanced, recurrent endometrial cancer, and Macrilen™ (macimorelin), a nove l orally-active ghrelin agonist for use in evaluating adult growth hormone deficiency ("AGHD"). Additionally, our Erk inhibitors and luteinizing hormone releasing hormone ("LHRH")-Disorazol Z compounds, potential oncology-indication product candidates, are in pre-clinical development.

We also continue to work concurrently to pursue strategic commercial initiatives in connection with our goal to become a commercially operating specialty biopharmaceutical organization. Our vision includes in-licensing, acquiring, promoting or co-promoting additional appropriate commercial products, as well as optimizing the ultimate launch of our potential product candidates (i.e. Macrilen™ and Zoptrex

) in certain strategic territories, including the US, Canada and the European Union, where we already have business activities. We also intend to license out certain commercial rights to licensees in territories where such out-licensing would enable the Company to ensure development, registration and launch of our product candidates.

The Company's common shares are listed both on The NASDAQ Capital Market ("NASDAQ"), under the symbol "AEZS", and on the Toronto Stock Exchange ("TSX"), under the symbol "AEZ".

Introduction

This Management's Discussion and Analysis ("MD&A") provides a review of the results of operations, financial condition and cash flows of Aeterna Zentaris Inc. for the

three-month and nine-month periods

ended

. In this MD&A, "Aeterna Zentaris", the "Company", "we", "us", "our" and the "Group" mean Aeterna Zentaris Inc. and its subsidiaries. This discussion should be read in conjunction with the Company's condensed interim consolidated financial statements and the accompanying notes thereto as at

and for the three-month and

s ended

(the "condensed interim consolidated financial statements"). Our condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") applicable to the preparation of interim financial statements, including IAS 34,

Interim Financial Reporting

("IAS 34").

All amounts in this MD&A are presented in US dollars, except for share, option and warrant data, or as otherwise noted.

About Forward-Looking Statements

This document contains forward-looking statements, which reflect our current expectations regarding future events. Forward-looking statements may include words such as "anticipate", "assume", "believe", "could", "expect", "foresee", "goal", "guidance", "intend", "may", "objective", "outlook", "plan", "seek", "should", "strive", "target" and "will". Forward-looking statements involve risks and uncertainties, many of which are discussed in this MD&A and others of which are discussed under the caption "Key Information – Risk Factors" in our most recent Annual Report on Form 20-F filed with the relevant Canadian securities regulatory authorities in lieu of an annual information form and with the US Securities and Exchange Commission ("SEC").

Such statements include, but are not limited to, statements about the progress of our research, development and clinical trials and the timing of, and prospects for, regulatory approval and commercialization of our product candidates, the timing of expected results of our studies, anticipated results of these studies, statements about the status of our efforts to establish a commercial operation and to obtain the right to promote or sell products that we did not develop and estimates regarding our capital requirements and our need for, and our ability to obtain, additional financing. Known and unknown risks

Third Quarter MD&A - 2015

and uncertainties could cause our 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 our research and development ("R&D") projects, the successful and timely completion of clinical studies, the degree of market acceptance once our products are approved for commercialization, our ability to take advantage of business opportunities in the pharmaceutical industry, our ability to protect our intellectual property, uncertainties related to the regulatory process and general changes in economic conditions. See also the section entitled "Risk Factors and Uncertainties" in this MD&A.

Given these uncertainties and risk factors, readers are cautioned not to place undue reliance on any forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments, unless required to do so by a governmental authority or by applicable law.

About Material Information

This MD&A includes information that we believe to be material to investors after considering all circumstances. We consider information and disclosures to be material if they result in, or would reasonably be expected to result in, a significant change in the market price or value of our securities, or where it is likely that a reasonable investor would consider the information and disclosures to be important in making an investment decision.

The Company is a reporting issuer under the securities legislation of all of the provinces of Canada, and our securities are registered with the SEC. The Company is therefore required to file or furnish continuous disclosure information, such as interim and annual financial statements, MD&A, proxy or information circulars, annual reports on Form 20-F, material change reports and press releases with the appropriate securities regulatory authorities. Copies of these documents may be obtained free of charge upon request from the Company's Corporate Secretary or on the Internet at the following addresses:

www.aezsinc.com

www.sedar.com

Key Developments

Status of Our Drug Pipeline

Phase 2 in ovarian cancer completed.

Investigator-driven and sponsored Phase 2 trial in prostate cancer completed.

Potential oral prostate cancer vaccine available for co-development/out-licensing.

Available for co-development/out-licensing.

Compound library transferred to The Medical University of South Carolina ("MUSC"). We have access to future potential development candidates.

Zoptrex™ (zoptarelin doxorubicin)

is a complex molecule that combines a synthetic peptide carrier with doxorubicin, a well-known chemotherapy agent. The synthetic peptide carrier is an LHRH agonist, a modified natural hormone with affinity for the LHRH receptor. The design of the compound allows for the specific binding and selective uptake of the cytotoxic conjugate by LHRH receptor-positive tumors. Potential benefits of this targeted approach include a better efficacy and a more favorable safety profile with lower incidence and severity of side effects as compared to doxorubicin alone.

We believe that Zoptrex

has the potential to become the first FDA-approved medical therapy for advanced, recurrent endometrial cancer, potentially resulting in the compound's rapid adoption as a novel core therapy for patient treatment and management, representing a significant potential market opportunity for the Company. Moving forward, we will continue to develop our commercialization plans regarding Zoptrex

in this indication. In addition, contingent on the success of the ZoptEC (

arelin Doxorubicin in

ancer) pivotal Phase 3 clinical trial in women with advanced, recurrent or metastatic endometrial cancer, we have additional areas of interest for further therapeutic development for zoptarelin doxorubicin, including ovarian, prostate, breast cancer and potentially bladder cancer.

On October 13, 2015, we announced that the independent Data and Safety Monitoring Board ("DSMB") had recommended that the pivotal Phase 3 ZoptEC study continue as planned. The DSMB's decision followed completion of its pre-specified second interim analysis on efficacy and safety at approximately 192 events. In April 2015, the DSMB had made the same recommendation following its first pre-specified analysis on safety and futility at approximately 128 events. A final analysis of the data is expected at approximately 384 events.

During the quarter, we also announced that Zoptrex

had met the primary end-point of the investigator-driven and sponsored Phase 2 clinical trial in Castration and Taxane Resistant Prostate Cancer ("CRPC") and demonstrated good tolerability. This was a single-arm Simon Optimum design Phase 2 study in 25 patients with CRPC.

Pre-clinical developments

As for our compounds in earlier stages of development, and as part of our resource optimization program implemented in 2014, we have decided to streamline our drug discovery activities and focus on specific projects related to our Erk inhibitors and our LHRH-disorazol Z product candidates.

Commercial Developments

EstroGel

During the quarter, we continued our promotional efforts related to our agreement with ASCEND Therapeutics US LLC ("ASCEND") to detail EstroGel

, a leading non-patch transdermal hormone replacement therapy product, in specific agreed-upon US territories in exchange for commissions revenue that is based upon incremental sales of the product that are generated over pre-established baselines.

Saizen

In late July, our contract sales force launched the promotion of Saizen

[somatropin (rDNA origin) for injection], a recombinant human growth hormone registered in the US for the treatment of growth hormone deficiency in children and adults. Pursuant to our promotional services agreement signed in May 2015 with EMD Serono, our contracted sales force details Saizen

to designated medical professionals across 23 specified US territories, representing an important incremental field promotion activity in support of Saizen

. Payment to Aeterna Zentaris is based on new, eligible patient starts on Saizen

above an agreed-upon baseline.

Our commercial operations consist of 23 full-time sales representatives and a sales-management staff, all of whom provide services pursuant to our agreement with a contract sales organization. The structuring and implementation of the commercial operations organization is felt to provide direct value through our existing co-promotion commercial activities, as well as to support our efforts to in-license and/or acquire products into our portfolio.

Corporate Developments

Public Offering and Related Events

On September 21, 2015, we entered into definitive agreements with the holders (the "Consenting Holders") of approximately 90% of our outstanding Series B Common Share Purchase Warrants (the "Series B Warrants"), which had been issued in connection with our public offering completed in March 2015. These agreements were intended to reduce the dilutive effect of the exercise of the Series B Warrants by establishing a cap on the number of shares issuable upon the alternate net cashless exercise of the Series B Warrants until the close of business on November 17, 2015. Under the terms of the agreements that became effective upon approval of the TSX and satisfaction of all regulatory conditions on September 24, 2015, the number of Common Shares issuable per Series B Warrant with respect to net cashless exercises prior to the close of business on November 17, 2015 may not exceed 33.23 based on a floor on the volume weighted average price of $0.0541.

On November 2, 2015, we announced that the holders (the "Participating Holders") of substantially all of the remaining outstanding Series B Warrants at that time had agreed to exercise all of the 4.1 million Series B Warrants held by them, at a maximum exercise ratio of approximately 33.23 common shares per warrant in accordance with the alternate cashless exercise feature in such Series B Warrants. Following the exercise of Series B Warrants by the Participating Holders in accordance with the terms of the agreements, approximately 0.8 million Series B Warrants, with an expiry date of September 12, 2016, will remain outstanding, representing approximately 2.7% of the originally issued number of Series B Warrants. As at November 5, 2015, a total of $2.9 million had been paid to the Participating Holders pursuant to the aforementioned agreements.

Between May 26, 2015 and November 4, 2015, we issued a total of approximately 507.2 million common shares pursuant to the exercise of approximately 27.2 million Series B Warrants on an alternate cashless basis.

Class Action Dismissal

On September 14, 2015, the United States District Court for the District of New Jersey (the "Court") dismissed the lawsuit that had been filed against the Company, but granted the plaintiffs leave to amend. In dismissing the lawsuit, the Court stated that "taking the complaint as a whole, plaintiffs have failed to state a claim" under the Private Securities Litigation Reform Act of 1995 or Rule 9 of the Federal Rules of Civil Procedure. On October 14, 2015, the plaintiffs filed a Second Amended Complaint against the Company. The Company will seek to have the lawsuit dismissed again, because management believes that the Second Amended Complaint also fails to state a claim.

Lease agreement

During the quarter, we terminated our lease arrangement for laboratory, office and storage space in Germany and entered into a new lease agreement for the rental of less space on the same premises. The new lease will enable us to save an estimated $0.5 million per year commencing in 2016 and through the expiry of the lease term, which is April 30, 2021.

Share consolidation

On October 16, 2015, we announced that we had convened a special meeting of shareholders to be held on Monday, November 16, 2015, to consider a special resolution authorizing the consolidation of the issued and outstanding Common Shares of the Company at a consolidation ratio of between 8-for-1 and 100-for-1. This consolidation is being submitted to shareholders so that the Company may avoid a potential delisting of our common shares from the NASDAQ and to improve our capital structure.

Restructuring

On October 12, 2015, we announced that our Board of Directors had approved a plan to restructure the finance and accounting operations and to close our Quebec City office. We will transfer all functions performed by the five employees in our Quebec City office to other personnel and will be adding new finance and accounting personnel, including a new Chief Financial Officer, in our Charleston, South Carolina, office.

The Company has committed to implementing the aforementioned restructuring immediately. We expect to record a provision for restructuring costs during the three-month period ended December 31, 2015, and this provision will include severance payments and other directly related costs.

Condensed Interim Consolidated Statements of Comprehensive Loss Information

Three months ended September 30,

Nine months ended September 30,

(in thousands, except share and per share data)

Revenues

Sales commissions, license fees and other

Operating expenses

Research and development costs

12,991

17,434

General and administrative expenses

Selling expenses

25,469

26,448

Loss from operations

(7,501

(9,843

(25,026

(26,448

Finance income

Finance costs

(7,940

(2,877

(15,438

Net finance (costs) income

(7,900

(1,786

(15,159

Net loss from continuing operations

(15,401

(11,629

(40,185

(21,182

Net income from discontinued operations

(15,290

(11,337

(40,125

(20,717

Other comprehensive (loss) income:

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation adjustments

Items that will not be reclassified to profit or loss:

Actuarial gain (loss) on defined benefit plans

(1,099

(3,169

Comprehensive loss

(15,311

(12,823

(37,905

(24,367

Net loss per share (basic and diluted) from continuing operations

Net income per share (basic and diluted) from discontinued operations

Weighted average number of shares outstanding:

Basic and diluted

229,450,370

59,163,710

137,825,986

56,881,919

Revenues

recorded during the three-month and nine-month periods ended September 30, 2015 resulted primarily from the amortization of a one-time, non-refundable payment made to us in December 2014 in connection with a master collaboration agreement, a technology transfer and technical assistance agreement and a license agreement we entered into with Sinopharm A-Think Pharmaceuticals Co., Ltd. ("Sinopharm") related to Zoptrex

. In addition, we continued to generate commissions revenue in connection with our co-promotion efforts related to EstroGel

, pursuant to the co-promotion services agreement entered into with ASCEND.

We expect revenues during the fourth quarter of 2015 to be higher than those recorded during the third quarter of 2015 due to the recording of higher commissions revenue associated with our promotional efforts related to EstroGel

we begin to generate commissions revenues related to Saizen

Operating Expenses

R&D costs

$4.1 million

$13.0 million

, respectively, compared to

$6.1 million

$17.4 million

for the same periods in

The decrease for the

, as compared to the same periods in

, is attributable to lower comparative employee compensation and benefits costs, facilities rent and maintenance as well as other costs. A substantial portion of this decrease is due to the realization of cost savings in connection with our global resource optimization program for which a provision had been recorded in the third quarter of 2014, as well as to the weakening, in 2015, of the EUR against the US dollar, which has appreciated on average by approximately 11.5% from the nine-month period ended September 30, 2014 to the same period in 2015. This decrease was partly offset by higher third-party costs, as described below.

The following table summarizes our R&D costs by nature of expense:

(in thousands)

Third-party costs

Employee compensation and benefits

Facilities rent and maintenance

Gain on disposal of equipment

Other costs**

_________________________

Includes a provision for restructuring in the amount of $1.6 million.

Includes depreciation, amortization, impairment charges and reversal of unused provision, as well as operating foreign exchange gains/losses.

The following tables summarize primary third-party R&D costs, by product candidate, incurred by the Company during the

(in thousands, except percentages)

Product Candidate

LHRH-Disorazol Z

As shown above, a substantial portion of the quarter-to-date and year-to-date third-party R&D costs relates to development initiatives associated with Zoptrex

, and in particular with our pivotal Phase 3 ZoptEC clinical trial initiated in 2013 with Ergomed PLC (formerly Ergomed Clinical Research Limited, hereinafter referred to as "Ergomed"). Third-party costs attributable to Zoptrex

increased by $1.1 million during the

, as compared to the same period in 2014, mainly due to a higher comparative number of patients enrolled in the clinical trial, which is now fully enrolled.

, ongoing services provided by Ergomed included the conducting of monitoring visits at various clinical sites, screening and enrolment initiatives, investigation-related management and analysis as well as regulatory and quality assurance support. ZoptEC-related efforts are progressing in accordance with pre-established timelines. As we continue to closely monitor all initiatives supported by Ergomed, we may decide to revise some of the trial's parameters or expand the scope of work performed by Ergomed, and consequently, total estimated costs in connection with the co-development and revenue sharing agreement may be adjusted. To date, our arrangement with Ergomed has been revised following our decision to open additional clinical sites and to perform additional sub-studies, resulting in overall, cumulative cost increases of approximately $1.8 million, as compared to our original expectations. We currently estimate that we will incur approximately $7 million pursuant to our agreement with Ergomed over the next 15 months as we proceed with and complete our ZoptEC trial.

Excluding the impact of foreign exchange rate fluctuations, we expect R&D costs to increase in the last quarter of 2015, as compared to the third quarter of 2015, with the recent initiation of our confirmatory Phase 3 clinical trial for Macrilen

. Based on currently available information and taking into account our more detailed forecasts for Macrilen

trials, and excluding the impact of foreign exchange rate fluctuations, we now expect that we will incur overall R&D costs of between $20 million and $22 million for the year ended December 31, 2015.

General and administrative ("G&A") expenses

$1.9 million

$7.4 million

, respectively, as compared to

$2.8 million

$7.2 million

. The comparative year-to-date increase is mainly attributable to transaction costs incurred in connection with the completion of our public offering completed in March 2015.

Excluding the impact of foreign exchange rate fluctuations, we expect G&A expenses to be similar in the last quarter of 2015, as compared to the third quarter of 2015, except for the impact of the restructuring provision that is expected to be recorded in the last quarter of 2015, as described above. Based on currently available information and forecasts, excluding the impact of foreign exchange rate fluctuations, we now expect that our G&A expenses will be higher for the year ended December 31, 2015, as compared to the year ended December 31, 2014, mainly due to the recording of transaction costs in connection with the completion of the March 2015 Offering in the first quarter of 2015 and to the recording of a provision for restructuring following the announcement of activities that will lead to the closure of our Quebec City office by year-end.

were $1.7 million and $5.1 million for the

, respectively, as compared to $0.9 million and $1.8 million for the same periods in

The increase in selling expenses for the three-month and nine-month periods ended September 30, 2015, as compared to the same periods in 2014, is mainly attributable to the implementation of our promotional activities associated with EstroGel

, which commenced in late 2014. We also expanded the size of our contracted sales force from 19 to 23 sales representatives in order to support our promotional efforts associated with Saizen

. More specifically, during the three-month and nine-month periods ended September 30, 2015, approximately $1.0 million and $3.0 million, respectively, of our selling expenses represented additional costs associated with our contracted sales force and our own sales and marketing staff.

Net finance costs

increased by $6.1 million and $20.4 million for the three-month and nine-month periods ended September 30, 2015, as compared to the same periods in 2014. These increases are almost entirely attributable to the change in fair value of our warrant liability. Such change in fair value results from the periodic "mark-to-market" revaluation, via the application of the intrinsic valuation and the Black-Scholes option pricing models, of outstanding share purchase warrants. The "mark-to-market" warrant valuation most notably has been impacted by the issuance of 74.6 million additional share purchase warrants and by the closing price of our common shares, which, on the NASDAQ, decreased from $0.60 per share on December 31, 2014 to $0.09 per share on September 30, 2015.

$15.3 million

$40.1 million

, respectively, or

, respectively, per basic and diluted share, compared to

$11.3 million

$20.7 million

, or $

per basic and diluted share, for the same periods in

. These increases are predominantly due to higher comparative net finance costs and to higher comparative selling expenses, partially offset by lower comparative R&D costs, as explained above.

Quarterly Consolidated Results of Operations Information

(in thousands, except for per share data)

June 30,

March 31,

(7,989

(9,536

(10,947

Net (loss) income from continuing operations

(15,148

(9,636

(15,099

(9,736

Net (loss) income per share from continuing operations (basic and diluted)*

Net (loss) income per share (basic and diluted)*

(8,410

(8,195

(7,972

(5,249

(4,304

(10,596

(5,024

(4,356

(8,243

Net loss per share from continuing operations (basic and diluted)*

Net loss per share (basic and diluted)*

Net (loss) income per share is based on the weighted average number of shares outstanding during each reporting period, which may differ on a quarter-to-quarter basis. As such, the sum of the quarterly net (loss) income per share amounts may not equal year-to-date net (loss) income per share.

Historical quarterly results of operations and net (loss) income from continuing operations cannot be taken as reflective of recurring revenue or expenditure patterns or of predictable trends, largely given the unpredictable quarterly variations attributable to our net finance (costs) income, which in turn are comprised of the impact of the periodic "mark-to-market" revaluation of our warrant liability and of foreign exchange gains and losses. Additionally, our R&D costs historically have varied on a quarter-over-quarter basis due to the ramping up or winding down of potential product candidate activities, which in turn are dependent upon a number of factors that often do not occur on a linear or predictable basis.

More recently, our selling expenses have increased on a quarter-over-quarter basis due to the ramping up of pre-commercialization activities associated with Macrilen™ (prior to the receipt of a Complete Response Letter from the FDA in November 2014) and to the deployment of our contracted sales force related to our promotional activities associated with EstroGel

and Saizen

In addition to the items referred to above, our net (loss) income also has been impacted by net variations attributable to our discontinued operations related to the manufacturing of Cetrotide

and related activities in the fourth quarter of 2013.

Condensed Interim Consolidated Statement of Financial Position Information

As at September 30,

As at December 31,

Cash and cash equivalents

38,345

34,931

Trade and other receivables and other current assets

Restricted cash equivalents

Other non-current assets

10,458

Total assets

48,901

47,435

Payables and other current liabilities

Warrant liability (current and non-current portions)

16,752

Non-financial non-current liabilities

14,464

17,152

Total liabilities

36,077

32,951

Shareholders' equity

12,824

14,484

Total liabilities and shareholders' equity

Of which approximately $3.1 million was denominated in EUR as at September 30, 2015 ($3.6 million as at December 31, 2014)

Comprised mainly of employee future benefits and provisions for onerous contracts.

The increase in cash and cash equivalents as at

, as compared to December 31, 2014, is due to the receipt of net proceeds of $34.4 million in connection with our public offering completed in March 2015, offset by variations in components of our working capital and by the effect of exchange rate fluctuations.

The decrease in payables and other current liabilities as at

, as compared to December 31, 2014, is mainly explained by the decrease of our provision for restructuring costs, following severance payments made during the first nine months of 2015, as well as by the lower comparative exchange rate of the EUR against the US dollar, which strengthened by approximately 8.0% from December 31, 2014 to September 30, 2015.

Our warrant liability increased from December 31, 2014 to

predominantly due to the issuance of 74.6 million additional share purchase warrants in connection with our public offering completed in March 2015, as discussed above, and to net fair value losses of $14.0 million, which were recorded pursuant to our periodic "mark-to-market" revaluation of the underlying outstanding share purchase warrants. This increase was partly offset by a $5.9 million reduction resulting from the early expiry and derecognition of 21.1 million warrants previously issued in connection with offerings completed in November 2013 and January 2014 and by a $20.6 million reduction resulting from the exercise of 23.4 million warrants.

The decrease in shareholders' equity as at

, as compared to December 31, 2014, is mainly attributable to the net increase in our deficit due to the recording of our year-to-date net loss, partly offset by an actuarial gain on our pension-related employee benefit obligation. This decrease in shareholders' equity is partly offset by the increase in our share capital following the issuance of shares in connection with our public offering completed in March 2015 and by the increase in our accumulated other comprehensive income due to foreign currency translation adjustments.

Financial Liabilities, Obligations and Commitments

We have certain contractual lease obligation commitments. Expected future minimum lease payments and future minimum sublease receipts under non-cancellable operating leases (subleases) are as follows:

As at September 30, 2015

Minimum lease payments

Sublease income

Less than 1 year

1 – 3 years

4 – 5 years

More than 5 years

During the quarter ended September 30, 2015, our lease arrangement in Germany for laboratory, office, and storage space was terminated, and we entered into a new lease agreement for the rental of less space on the same premises as compared to our former arrangement. The new lease expires on April 30, 2021 and is subject to renewal upon notice by us for two additional four-year periods. Under the terms of the arrangement, the minimum lease payment may be increased or decreased in accordance with the fluctuations in the German consumer price index up to 5% on a cumulative basis.

Outstanding Share Data

As at November 4, 2015, we had 632,724,282 common shares issued and outstanding, as well as 3,930,154 stock options and 54,008,587 warrants outstanding, including 2,606,451 Series B Share Purchase Warrants that contain the alternate cashless exercise feature.

Capital Disclosures

Our objective in managing capital, consisting of shareholders' equity, with cash and cash equivalents and restricted cash equivalents being its primary components, is to ensure sufficient liquidity to fund R&D activities, selling expenses, general and administrative expenses and working capital.

Over the past several years, we have increasingly raised capital via public equity offerings and drawdowns under various "At-the-market" sales programs as our primary source of liquidity.

Our capital management objective remains the same as that in previous periods. The policy on dividends is to retain cash to keep funds available to finance the activities required to advance our product development portfolio and to pursue appropriate commercial opportunities as they may arise.

We are not subject to any capital requirements imposed by any regulators or by any other external source.

Liquidity, Cash Flows and Capital Resources

Our operations and capital expenditures have been financed through certain transactions impacting our cash flows from operating activities, public equity offerings, as well as from drawdowns under various "At-the-market" programs.

Based on our assessment, which took into account current cash levels, as well as our strategic plan, corresponding budgets and forecasts and ability to scale down some expenses as needed, we believe that we have sufficient liquidity and financial resources to fund planned expenditures and other working capital needs for at least, but not limited to, the 12-month period following the statement of financial position date of

We may endeavour to secure additional financing, as required, through strategic alliance arrangements or through other activities, as well as via the issuance of new share capital or other securities.

The variations in our liquidity by activity are explained below.

Cash and cash equivalents - Beginning of period

45,458

39,553

43,202

Cash flows from operating activities:

Cash used in operating activities from continuing operations

(7,261

(6,432

(25,277

(22,111

Cash provided by (used in) operating activities from discontinued operations

(7,150

(6,549

(25,450

(22,499

Cash flows from financing activities:

Net cash provided by financing activities

28,737

22,283

Cash flows from investing activities:

Net cash provided by (used in) investing activities

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents - End of period

41,952

Operating Activities

totalled

$25.5 million

$6.5 million

$22.5 million

The increase in cash used in operating...


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