COSCIENS Biopharma 6K Current report | CSCI 9 Nov 23

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Exhibit 99.1

Aeterna Zentaris Inc.

Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars)

(Unaudited)

Condensed Interim Consolidated Statements of Financial Position	2
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	3
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss	4
Condensed Interim Consolidated Statements of Cash Flows	5
Notes to Condensed Interim Consolidated Financial Statements	6

Aeterna Zentaris Inc.

Condensed Interim Consolidated Statements of Financial Position

(In thousands of US dollars)

(Unaudited)

	As of September 30, 2023			As of December 31, 2022
	$			$
ASSETS
Current assets
Cash and cash equivalents		38,756			50,611
Trade and other receivables		546			732
Inventory		91			229
Income taxes receivable		116			1,428
Prepaid expenses and other current assets		2,402			2,488
Total current assets		41,911			55,488

Non-current assets
Restricted cash equivalents		320			322
Property and equipment		255			216
Total non-current assets		575			538
Total assets		42,486			56,026

LIABILITIES
Current liabilities
Payables and accrued liabilities		3,300			3,828
Provisions		56			45
Income taxes payable		106			108
Deferred revenues (note 3)		90			2,949
Deferred gain (note 4)		529			-
Lease liabilities		147			114
Total current liabilities		4,228			7,044
Non-current liabilities
Deferred revenues (note 3)		1,647			1,684
Deferred gain (note 4)		-			110
Lease liabilities		70			65
Employee future benefits (note 5)		10,105			11,159
Provisions		158			188
Total non-current liabilities		11,980			13,206
Total liabilities		16,208			20,250

Shareholders’ equity
Share capital (note 6)		293,410			293,410
Warrants		5,085			5,085
Contributed surplus		90,682			90,332
Deficit		(362,088	)		(352,084	)
Accumulated other comprehensive loss		(811	)		(967	)
Total Shareholders’ equity		26,278			35,776
Total liabilities and shareholders’ equity		42,486			56,026

Commitments (note 10)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Approved by the Board of Directors

/s/ Carolyn Egbert		/s/ Dennis Turpin
Carolyn Egbert, Chair of the Board		Dennis Turpin, Director

Aeterna Zentaris Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

For the nine months ended September 30, 2023, and 2022

(In thousands of US dollars)

(Unaudited)

	Share capital		Warrants		Contributed surplus		Deficit			Accumulated other comprehensive loss			Total
	$		$		$		$			$			$
Balance – January 1, 2023		293,410		5,085		90,332		(352,084	)		(967	)		35,776
Net loss		-		-		-		(10,917	)		-			(10,917	)
Other comprehensive loss:
Foreign currency translation adjustments		-		-		-		-			156			156
Actuarial gain on defined benefit plans (note 5)		-		-		-		913			-			913
Comprehensive loss								(10,004	)		156			(9,848	)
Share-based compensation costs		-		-		350		-			-			350
Balance – September 30, 2023		293,410		5,085		90,682		(362,088	)		(811	)		26,278

	Share capital		Warrants		Contributed surplus		Deficit			Accumulated other comprehensive loss			Total
	$		$		$		$			$			$
Balance – January 1, 2022		293,410		5,085		89,788		(334,619	)		(678	)		52,986
Balance		293,410		5,085		89,788		(334,619	)		(678	)		52,986
Net loss		-		-		-		(10,276	)		-			(10,276	)
Other comprehensive loss:
Foreign currency translation adjustments		-		-		-		-			(26	)		(26	)
Actuarial gain on defined benefit plans		-		-		-		6,231			-			6,231
Comprehensive income								(4,045	)		(26	)		(4,071	)
Comprehensive income (loss)								(4,045	)		(26	)		(4,071	)
Share-based compensation costs		-		-		503		-			-			503
Balance – September 30, 2022		293,410		5,085		90,291		(338,664	)		(704	)		49,418
Balance		293,410		5,085		90,291		(338,664	)		(704	)		49,418

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Aeterna Zentaris Inc.

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

For the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data)

(Unaudited)

	2023			2022			2023			2022
	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
		$			$			$			$
Revenues (note 3)		3			1,860			4,377			3,155

Expenses
Cost of sales		11			14			167			106
Research and development		2,751			3,293			9,692			8,081
Selling, general and administrative		1,791			2,274			6,130			6,218
Total expenses		4,553			5,581			15,989			14,405

Loss from operations		(4,550	)		(3,721	)		(11,612	)		(11,250	)

Gain (loss) due to changes in foreign currency exchange rates		(12	)		301			(44	)		977
Interest income		419			-			739			-
Other finance costs		(2	)		-			-			(3	)
Net finance income		405			301			695			974

Loss before income taxes		(4,145	)		(3,420	)		(10,917	)		(10,276	)

Income tax recovery		-			-			-			-
Net loss		(4,145	)		(3,420	)		(10,917	)		(10,276	)

Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation adjustments		323			(105	)		156			(26	)
Items that will not be reclassified to profit or loss:
Actuarial gain (loss) on defined benefit plans (note 5)		993			(1,794	)		913			6,231
Comprehensive loss		(2,829	)		(5,319	)		(9,848	)		(4,071	)

Basic and diluted loss per share (note 8)		(0.85	)		(0.70	)		(2.25	)		(2.12	)

Weighted average number of shares outstanding (basic and diluted)		4,855,876			4,855,876			4,855,876			4,855,876

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Aeterna Zentaris Inc.

Condensed Interim Consolidated Statements of Cash Flows

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

	2023			2022			2023			2022
	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
		$			$			$			$
Cash flows from operating activities
Net loss for the period		(4,145	)		(3,420	)		(10,917	)		(10,276	)
Items not affecting cash and cash equivalents:
Provisions		(20	)		7			(10	)		12
Depreciation and amortization		42			33			126			104
Share-based compensation costs		27			443			350			503
Employee future benefits		132			69			397			266
Amortization of deferred revenues		-			(1,248	)		(1,554	)		(1,952	)
Net foreign exchange differences		(3	)		-			(4	)		-
Other non-cash items		2			3			7			3
Refund of income taxes		675			-			1,322			830
Changes in operating assets and liabilities (note 7)		(94	)		168			(1,455	)		254
Net cash used in operating activities		(3,384	)		(3,945	)		(11,738	)		(10,256	)

Cash flows from financing activities
Payments on lease liabilities		(33	)		(33	)		(113	)		(101	)
Net cash used in financing activities		(33	)		(33	)		(113	)		(101	)

Cash flows from investing activities
Purchase of property and equipment		(9	)		(9	)		(14	)		(57	)
Change in restricted cash equivalents		(1	)		4			(1	)		4
Net cash used in investing activities		(10	)		(5	)		(15	)		(53	)
Effect of exchange rate changes on cash and cash equivalents		(3	)		(358	)		11			(1,074	)

Net change in cash and cash equivalents		(3,430	)		(4,341	)		(11,855	)		(11,484	)
Cash and cash equivalents – Beginning of period		42,186			58,157			50,611			65,300
Cash and cash equivalents – End of period		38,756			53,816			38,756			53,816

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

1. Business overview

Summary of business

Aeterna Zentaris is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company’s lead product, Macrilen^® (macimorelin), is the first and only U.S. Food and Drug Administration (“FDA”) and European Medicines Agency (“EMA”) approved oral test indicated for the diagnosis of patients with adult growth hormone deficiency (“AGHD”). Macimorelin is currently marketed under the tradename Ghryvelin™ in the European Economic Area and the United Kingdom through an exclusive licensing agreement with Pharmanovia. The Company’s several other license and commercialization partners are also seeking approval for commercialization of macimorelin in Israel and the Palestinian Authority, the Republic of Korea, Turkey and several non-European Union Balkan countries. The Company is actively pursuing business development opportunities for the commercialization of macimorelin in North America, Asia and the rest of the world.

The Company is also dedicated to the development of therapeutic assets and has taken steps to establish a pre-clinical pipeline to potentially address unmet medical needs across several indications with a focus on rare or orphan indications.

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the “Board”) on November 8, 2023.

2. Basis of presentation

These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board.

The unaudited condensed interim consolidated financial statements do not include all the notes normally included in annual consolidated financial statements. Accordingly, these unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements as of and for the year ended December 31, 2022.

The accounting policies used in these condensed interim consolidated financial statements are consistent with those presented in the Company’s annual consolidated financial statements.

New standards and amendments

Effective January 1, 2023, the Company adopted the Disclosure of Accounting Policies (amendments to IAS 1 and IFRS Practice Statement 2). The amendments to IAS 1 require that the Company discloses its material accounting policies instead of its significant accounting policies. As a result of the adoption of these amendments, there were no adjustments to the presentation or amounts recognized in the interim financial statements.

Critical accounting estimates and judgements

The preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Judgements, estimates and assumptions are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time at which the Company’s condensed interim consolidated financial statements are prepared.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

Management reviews, on a regular basis, the Company’s accounting policies, assumptions, estimates and judgements in order to ensure that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS applicable to interim financial statements. Critical accounting estimates and assumptions, as well as critical judgements used in applying accounting policies in the preparation of the Company’s condensed interim consolidated financial statements, were the same as those applied to the Company’s annual consolidated financial statements as of and for the year ended December 31, 2022.

3. Revenue

The Company derives revenue from the transfer of goods and services over time and at a point in time in the following categories:

Summary of revenue from transfer of goods and services

	2023		2022		2023		2022
	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
		$		$		$		$
License fees		-		605		1,554		831
Development services		-		1,202		2,741		2,091
Product sales		-		-		-		57
Royalties		3		14		29		57
Supply chain		-		39		53		119
Total revenue		3		1,860		4,377		3,155

The Company recorded revenue for the transfer of services over time for the three months ended September 30, 2023, nil (2022 – $1,807) and the nine months ended September 30, 2023, of $4,295 (2022 - $2,922). Revenue recorded at a point in time for the three months ended September 30, 2023, was $3 (2022 – $53) and the nine months ended September 30, 2023, was $82 (2022 - $233).

Pharmanovia:

On March 15, 2023, with the Company’s consent, Consilient Health (“CH”) entered into an assignment agreement with Pharmanovia to transfer the current licensing agreement for the commercialization of macimorelin in the European Economic Area and the United Kingdom to Pharmanovia, as well as the current supply agreement pursuant to which the Company agreed to provide the licensed product (together, the “Assignment Agreement”). Also on March 15, 2023, the Company and Pharmanovia entered into an amendment agreement, pursuant to which the Company provided its acknowledgement and consent to the Assignment Agreement and agreed to certain amended terms which do not materially differ from the previous license and supply agreement with CH. Subsequent to the execution of the Assignment Agreement, the aggregate amount of the transaction price allocated to the Company’s unsatisfied performance obligations was $1,658 (€1,540), comprised of; the combined adult indication performance obligation of $1,233 (€1,145), and the combined pediatric indication performance obligation of $425 (€395). The Company will continue to recognize revenue over time using an output method based on units of licensed product supplied to Pharmanovia. The total units that the Company expects to supply to Pharmanovia is an estimate, based on current projections and anticipated market demand, and therefore will be a significant judgement that will be relied upon when using the outputs method to recognize revenue.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

Novo Nordisk Health Care AG:

On August 26, 2022, Novo provided the Company with a notice of termination of the Novo Amendment. Under the terms of the Novo Amendment, the termination was effective May 23, 2023, upon the completion of a 270-day notice period (“notice period”). Upon termination, the rights and licenses granted by the Company to Novo under the Novo Amendment returned to the Company, and the Company regained full rights to continue the clinical development and future commercialization of Macrilen™. Following the notice of termination and throughout the 270-day notice period, as per the terms of the Novo Amendment, Novo continued to fund DETECT-trial costs up to $10.1 million (€9.4 million). As of May 23, 2023, the Company recognized all remaining license fees associated with the Pediatric indication and development services revenue previously recorded in deferred revenue.

Liabilities related to contracts with customers

The following table provides a summary of deferred revenue balances:

Summary of deferred revenue

	September 30, 2023
	Current		Non-current		Total
		$		$		$
Novo Nordisk Health Care		-		-		-
Pharmanovia		82		1,528		1,610
NK Meditech		8		119		127
		90		1,647		1,737

	December 31, 2022
	Current		Non-current		Total
		$		$		$
Novo Nordisk Health Care		2,914		-		2,914
Consilient Health		35		1,556		1,591
NK Meditech		-		128		128
		2,949		1,684		4,633

4. Deferred gain

On August 10, 2021, the Company entered into a trademark maintenance and assignment option agreement with ARES Trading SA, a subsidiary of Merck KGaA (“Merck”), with respect to the trademarks owned by the Company on Cetrotide^® (cetrorelix acetate for injection). As consideration for having been granted the option, Merck has agreed to pay the Company a total of $529 (€0.5 million) a portion of which is to be calculated as a reimbursement of all internal and external trademark fees incurred by the Company for all years beginning with 2020 until the transfer date. The transfer of the trademarks, which is expected to take place within the next 12 months, shall constitute a sale, after which the Company will no longer have any ownership in or obligations related to the Cetrotide trademarks.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

5. Employee future benefits

The change in the Company’s employee future benefit obligations is summarized as follows:

Summary of net defined benefit liability asset

	benefit plans			benefit plans			Total			Total
	Nine months ended September 30, 2023									Year ended December 31, 2022
	Pension			Other
	benefit plans			benefit plans			Total			Total
		$			$			$			$
Change in plan liabilities
Balances – Beginning of the period		21,657			93			21,750			29,412
Current service cost		89			11			100			142
Interest cost		599			1			600			295
Actuarial gain from changes in financial assumptions		(1,249	)		(1	)		(1,250	)		(5,915	)
Benefits paid		(560	)		-			(560	)		(752	)
Impact of foreign exchange rate changes		(295	)		(2	)		(297	)		(1,432	)
Balances – End of the period		20,241			102			20,343			21,750

Change in plan assets
Balances – Beginning of the period		10,591			-			10,591			11,927
Interest income from plan assets		296			-			296			120
Employer contributions		25			-			25			45
Employee contributions		7			-			7			10
Benefits paid		(198	)		-			(198	)		(247	)
Remeasurement of plan assets		-			-			-			(641	)
Change in asset ceiling		(337	)		-			(337	)		-
Impact of foreign exchange rate changes		(146	)		-			(146	)		(623	)
Balances – End of the period		10,238			-			10,238			10,591

Net liability of the unfunded plans		10,003			102			10,105			10,787
Net liability of the funded plans		-			-			-			372
Net amount recognized as Employee future benefits		10,003			102			10,105			11,159

Amounts recognized:
In net loss		385			12			397			295
Actuarial gain on defined benefit plans in other comprehensive loss		912			1			913			5,262

The calculation of the employee future benefit obligation is sensitive to the discount rate assumption and other assumptions such as the rate of the pension benefit increase. Discount rates were 4.20% as of September 30, 2023, and 3.75% as of December 31, 2022, causing the variances in the actuarial gain on defined benefit plan during the nine months ended September 30, 2023.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

6. Shareholders’ equity

Share capital

The Company has authorized an unlimited number of common shares (being voting and participating shares) with no par value, as well as an unlimited number of preferred, first and second ranking shares, issuable in series, with rights and privileges specific to each class, with no par value.

Summary of share capital

	Common shares		Amount
	#		$
Balance – December 31, 2022		4,855,876		293,410

		-		-
Balance – September 30, 2023		4,855,876		293,410

On July 15, 2022, the Company’s shareholders and board of directors approved an amendment to the Company’s articles of incorporation to effect a 1-for-25 share consolidation (reverse split) of the Company’s common shares. The Company’s outstanding stock options, DSUs and warrants were also adjusted to reflect the 1-for-25 share consolidation (reverse split) of the Company’s common shares. Accordingly, all common shares, DSU, warrants, stock options and per share amounts in these interim condensed consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the share consolidation (reverse split). Outstanding warrant and stock options were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The share consolidation (reverse split) was affected on July 21, 2022.

Share-based compensation

On January 17, 2023, the Company granted 14,000 (2022 – 2,000) stock options under the Long-Term Incentive Plan. The stock options have a term of seven years and will vest over a period of three years. The fair value at grant date is estimated using a Black-Scholes option pricing model, considering the terms and conditions upon which the options were granted, using the following assumptions:

Summary of assumptions to determine share-based compensation costs over the life of awards

	September 30, 2023			September 30, 2022
Expected dividend yield	$	0.00		$	0.00
Expected volatility		104.46	%		115.75	%
Risk-free annual interest rate		3.56	%		1.59	%
Expected life (years)		5.45			5.72
Share price	$	3.75		$	8.88
Exercise price	$	3.75		$	8.88
Grant date fair value	$	2.99		$	7.47

The expected volatility of these stock options was determined using historical volatility rates and the expected life was determined using the weighted average life of past options issued.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

The compensation expense for the three months ended September 30, 2023, was $27 (2022 – $43) and for the nine months ended September 30, 2023, was $66 (2022 – $101) recognized over the vesting period. Option activity for the nine months ended September 30, 2023, and 2022, was as follows:

Summary of number and weighted average exercise prices of share options

	Stock options			Weighted average exercise price
	#			$
Balance – January 1, 2023		42,030			20.05
Granted		14,000			3.75
Cancelled / Forfeited		(400	)		87.00
Balance – September 30, 2023		55,630			15.47

	Stock options		Weighted average exercise price
	#		$
Balance – January 1, 2022	43,455		22.00
Granted	2,000		8.88
Cancelled / Forfeited	(2,399	)	10.98
Balance – September 30, 2022	43,056		21.95

Deferred share units

On June 14, 2023, the Company granted 100,000 (2022 – 80,000) DSUs under the Long-Term Incentive Plan. The compensation expense for the nine months ended September 30, 2023, was $284 (2022 - $402) and is presented in selling, general and administrative expenses. DSU activity for the nine months ended September 30, 2023, was as follows:

Summary of DSU activity

	2023		2022
	#		#
Balance – January 1,		96,920		16,920
Granted		100,000		80,000
Balance – September 30,		196,920		96,920

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

7. Supplemental disclosure of cash flow information

Disclosure of changes in operating assets and liabilities

	2023			2022			2023			2022
	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
	$			$			$			$
Changes in operating assets and liabilities:
Trade and other receivables		(411	)		205			(9	)		425
Inventory		(1	)		41			139			(165	)
Prepaid expenses and other current assets		186			(481	)		64			(1,240	)
Payables and accrued liabilities		(159	)		(133	)		(322	)		(14	)
Deferred revenues		(27	)		595			(1,386	)		1,425
Taxes payable		-			210			-			210
Provision for restructuring and other costs		(6	)		-			(11	)		-
Employee future benefits		(142	)		(269	)		(396	)		(387	)
Deferred gain		466			-			466			-
Increase (decrease) in operating assets and liabilities		(94	)		168			(1,455	)		254

8. Net loss per share

The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders.

Summary of pertinent data relating to computation of basic and diluted net loss per share

	2023			2022			2023			2022
	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
	$			$			$			$
Net loss		(4,145	)		(3,420	)		(10,917	)		(10,276	)
Basic and diluted weighted-average shares outstanding		4,855,876			4,855,876			4,855,876			4,855,876
Basic weighted-average shares outstanding		4,855,876			4,855,876			4,855,876			4,855,876

Basic and diluted loss per share		(0.85	)		(0.70	)		(2.25	)		(2.12	)
Basic loss per share		(0.85	)		(0.70	)		(2.25	)		(2.12	)

Items excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:
Stock options and DSUs		252,550			142,375			252,550			142,375
Warrants		457,648			457,648			457,648			457,648
Anti-dilutive shares

9. Segment information

The Company operates in a single operating segment, being the biopharmaceutical segment.

Aeterna Zentaris Inc.

Notes to the Condensed Interim Consolidated Financial Statements

As of September 30, 2023, and for the three and nine months ended September 30, 2023, and 2022

(In thousands of US dollars, except share and per share data and as otherwise noted)

(Unaudited)

10. Commitments

Significant expenditure contracted for at the end of the reporting period but not recognized as liabilities is as follows:

Schedule of expected future minimum lease payments

	TOTAL
	$
Less than 1 year		6,857
1 - 3 years		131
4 - 5 years		36
More than 5 years		-
Total		7,024

In 2021, the Company executed various agreements including in-licensing and similar arrangements with development partners. Such agreements may require the Company to make payments on achievement of stages of development, launch or revenue milestones, although the Company generally has the right to terminate these agreements at no penalty. The Company may have to pay up to $38,127 upon achieving certain sales volumes, regulatory or other milestones related to specific products.

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