On March 15, 2017 Aeterna Zentaris Inc. (NASDAQ, TSX: AEZS) (the "Company"), a specialty biopharmaceutical company engaged in developing and commercializing novel treatments in oncology and endocrinology, reported financial and operating results for the fourth quarter and year ended December 31, 2016 (Press release, AEterna Zentaris, MAR 15, 2017, View Source [SID1234518148]).

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Commenting on recent key developments, David A. Dodd, President and Chief Executive Officer of the Company, stated, "During the fourth quarter and the first few weeks of 2017, we made substantial progress with our development programs. On January 30, 2017 we announced the conclusion of the clinical phase of our development of Zoptrex. The following day we had a successful pre-NDA meeting with the FDA. We anticipate reporting top-line results in April. This is a very exciting and anxious time for us, as we approach the culmination of highly dedicated and successful work by many throughout our Company. I would like to thank our R&D team for their hard work in bringing Zoptrex to this point."

Mr. Dodd continued his commentary with an update on the development of Macrilen. "On January 4, 2017, we reported the top-line results from our confirmatory Phase 3 study of Macrilen for the evaluation of adult growth hormone deficiency ("AGHD"). We reported that the top-line results indicated that macimorelin did not meet one of the pre-defined criteria required to demonstrate equivalence to the Insulin Tolerance Test ("ITT") as a means of diagnosing AGHD. Following this announcement, we conducted a thorough evaluation of the study data, including external statistical expertise and independent review by leading endocrinologists in both the U.S. and Europe. We were highly encouraged by the results and input received from these experts. As we announced on February 13, 2017, we concluded that Macrilen demonstrated performance supportive of achieving registration with the U.S. Food and Drug Administration, despite its failure to meet one of the pre-defined equivalence criteria. We explained the reasons for our conclusion in our February 13 release. Briefly, we concluded that Macrilen demonstrated more consistent and reproducible results than the ITT. Moreover, Macrilen stimulated the pituitary gland more powerfully than the ITT and demonstrated good specificity and sensitivity in this study, thus reproducing the results of our previous study. We demonstrated that Macrilen achieves a high degree of correlation with the ITT, which could be further optimized when a higher cut-off point, such as the ITT cut-off point, is used for the Macrilen test. We believe that such an increased cut-off point would be justified by the more powerful stimulation of Macrilen as compared to the ITT. We are scheduled to meet with the FDA at the end of Q1 to discuss our rationale for proceeding with Macrilen."

Fourth Quarter and Full Year Financial Highlights
Revenues
Sales commission and other were $94,000 and $414,000 for the three and twelve months ended December 31, 2016, respectively, and $41,000 and $297,000, for the same periods in 2015, respectively. The quarter-over-quarter and year-over-year increases were attributable to our sales team exceeding pre-established unit sales baseline thresholds under our co-promotion agreements to sell Saizen and to our promotion of APIFINY, which did not begin until the first quarter of 2016. In the corresponding periods of 2015, sales commission and other revenues were mainly related to EstroGel, which we no longer promote.
License fees were $210,000 and $497,000 for the three and twelve months ended December 31, 2016, respectively, as compared to $61,000 and $248,000 for the same periods in 2015. The increase is explained by the out-licensing agreements that we entered into in 2016 for Zoptrex with respect to certain territories outside our core areas of interest.

Research and Development ("R&D") costs
R&D costs were $4.6 million and $16.5 million for the three and twelve months ended December 31, 2016, respectively, compared to $4.2 million and $17.2 million for the same periods in 2015. The increase in our R&D costs for the three months ended December 31, 2016, as compared to the same period in 2015, was mainly attributable to higher comparative third-party costs in connection with the confirmatory Phase 3 clinical trial of Macrilen, which was initiated late in 2015 with the enrollment of the first patient in the fourth quarter of 2015. Patient recruitment was completed in the fourth quarter of 2016. The decrease in our R&D costs for the twelve months ended December 31, 2016, as compared to the same period in 2015, was mainly attributable to the realization of cost savings in connection with our ongoing efforts to streamline our R&D activities and to increase our commercial operations and flexibility by reducing our R&D staff, which was started in 2014.
General and Administrative ("G&A") Expenses

G&A expenses were $1.8 million and $7.1 million for the three and twelve months ended December 31, 2016, respectively, as compared to $4.0 million and $11.3 million for the same periods in 2015. The decrease in our G&A expenses for the three months and twelve months ended December 31, 2016, as compared to the same periods in 2015, is mainly due to the recording in the fourth quarter of 2015 of a provision related to the restructuring of our finance and accounting function and the closure of our office in Quebec City, as well as the realization of cost savings in connection with the restructuring. The comparative decrease for the twelve-month period is also explained by certain transaction costs allocated to warrants in connection with the completion of share issuances in March and December 2015.

Selling Expenses
Selling expenses were $1.5 million and $6.7 million for the three and twelve months ended December 31, 2016, respectively, as compared to $1.8 million and $6.9 million for the same periods in 2015. Selling expenses for the three and twelve months ended December 31, 2016 and 2015 represent mainly the costs of our contracted sales force related to our co-promotion activities as well as our internal sales management team. Selling expenses remained relatively stable during 2016.

Net Finance (Costs) Income
Net finance (costs) income were $(622,000) and $4.5 million for the three and twelve months ended December 31, 2016, as compared to $(185,000) and $(15.3) million, for the same periods in 2015. The increases in finance income or decreases in finance costs were mainly attributable to the change in fair value recorded in connection with our warrant liability. Such change in fair value results from the periodic "mark-to-market" revaluation, via the application of option pricing models, of outstanding share purchase warrants. During 2016, the "mark-to-market" warrant valuation was impacted by the expiration of the remaining Series B Warrants. During 2015, the change in assumptions that were applied to determine the fair value of the alternate cashless feature included in the Series B Warrants significantly impacted the "mark-to-market" valuation. Furthermore, the closing price of our common shares, which, on the NASDAQ, fluctuated from $3.25 to $4.94 during the three-month period and $2.67 to $4.94 during the twelve-month period ended December 31, 2016, respectively, compared to $4.00 to $11.43 and $4.00 to $84.20 during the same periods in 2015, also had a direct impact on the change in fair value of warrant liability. In addition, with specific reference to 2015, finance costs were also impacted by the warrant exercise inducement fee paid to certain holders of the Series B Warrants.

Net Loss
Net loss for the three and twelve months ended December 31, 2016 was $(8.2) million and $(25.0) million, or $(0.71) and $(2.41) per basic and diluted share, as compared to a net loss of $(10.0) million and $(50.1) million, or $(1.46) and $(18.14) per basic and diluted share, for the same periods in 2015. The decrease in net loss for the three months ended December 31, 2016, as compared to the same period in 2015, is due largely to lower G&A expenses, as presented above. The decrease in net loss for the twelve months ended December 31, 2016, as compared to the same period in 2015, is due largely to lower operating expenses and higher comparative net finance income, as presented above.

Liquidity
Cash and cash equivalents were $22.0 million as at December 31, 2016, as compared to $41.5 million as at December 31, 2015. The decrease in cash and cash equivalents as at December 31, 2016, as compared to December 31, 2015, is mainly due to the net cash used in operating activities. The decrease was partially offset by the net proceeds generated by the sale and issuance of common shares and warrants during 2016.