On March 26, 2019 Aeterna Zentaris Inc. (NASDAQ: AEZS) (TSX: AEZS) reported its financial and operating results for the fourth quarter and year ended December 31, 2018 (Press release, AEterna Zentaris, MAR 26, 2019, View Source [SID1234534653]).
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All Amounts are in U.S. Dollars
Highlights
Total revenue for fiscal 2018 was $26.9 million, compared to $0.9 million for fiscal 2017
Income from operations for fiscal 2018 was $9.8 million, compared to a loss from operations of $23.1 million for fiscal 2017
Net income for fiscal 2018 was $4.2 million, compared to a net loss of $16.8 million for fiscal 2017
Total revenue for Q4 2018 was $1.4 million, compared to $0.2 million for Q4 2017
After our year-end, in January 2019, European Medicines Agency (EMA) granted marketing authorization for macimorelin for diagnosis of adult growth hormone deficiency
As of December 31, 2018, we had $14.5 million of unrestricted cash and cash equivalents
Summary of Full-Year Results
For the year ended December 31, 2018, we reported a consolidated net income of $4.2 million, or $0.25 per common share, as compared with a consolidated net loss of $16.8 million, or $1.12 loss per common share, for the year ended December 31, 2017. The $21 million improvement in results arose primarily from a $23.9 million increase in gross profit (which resulted primarily from the $24 million royalty payment received from Strongbridge Biopharma) and a $9.1 million reduction in operating expenses. These improvements were offset in part by the $5.55 million in tax expense in 2018 (compared to a tax recovery in 2017 of $3.5 million) and $1.6 million decrease in net finance income.
Revenues
Our total revenue for the year ended December 31, 2018 was $26.9 million as compared with $0.9 million for the same period in 2017, representing an increase of $26.0 million. The 2018 revenue comprised $24.3 million in license revenue, $2.2 million in product sales, $0.2 million in royalty income and $0.2 million in sales commissions as compared with $0.4 million in license fee and $0.5 million in license fees in 2017. The increase in total revenue in 2018 relates to license fees, royalty income and product sales associated with executing the License and Assignment Agreement for Macrilen (macimorelin) in January 2018.
Cost of sales
Our total cost of goods sold for the year ended December 31, 2018 was $2.1 million as compared with nil for the same period in 2017, reflecting the costs of our sales of Macrilen (macimorelin) inventory pursuant to an interim supply agreement under the License and Assignment Agreement.
Operating Expenses
Our total operating expenses for the year ended December 31, 2018 was $14.9 million as compared with $24.0 million for the same period in 2017, representing a decline of $9.1 million. This was primarily due to a $7.8 million decline in research and development costs, while the $2.0 million decrease in selling expenses was offset by $0.1 million increase in general and administrative expenses.
In 2018, our focus was on our PIP study for Macrilen (macimorelin), for which we received $0.4 million from our licensee for its share of such costs.
Our general and administrative expenses were higher in 2018 than expected as we incurred significant legal costs in the course of reaching settlement agreements for $1.4 million.
Our selling expenses are in-line with expectations and lower in 2018 than in 2017 due to the Q1 2018 termination of our North American sales team and our co-promotion activities as we shifted our focus to licensing Macrilen (macimorelin).
Net Finance Income
Our net finance income for the year ended December 31, 2018 was $1.2 million, as compared to $2.8 million for the same period in 2017, representing a decrease of $1.6 million. The decline in net finance income is primarily due 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 pricing models to our outstanding share purchase warrants.
Summary of Fourth Quarter Results
For the three-month period ended December 31, 2018, we reported a consolidated net loss of $5.1 million, or $0.31 loss per common share, as compared with a consolidated net loss of $0.5 million, or $0.03 loss per common share, for the three-month period ended December 31, 2017. The $4.6 million increase in net loss in 2018, as compared with 2017, results primarily from $2.8 million in tax expense movement, $1.4 million increase in cost of goods, $0.9 million increase in finance costs and $0.8 million increase in settlements, offset by $1.2 million increase in total revenues. In the fourth quarter of 2018, unlike in 2017, we earned $0.2 million in royalty income from our licensee and expensed $0.8 million in one-time settlement costs to settle a lawsuit against the Company from two of our former executives. In the fourth quarter of 2018 we also actively began the EMA and FDA pediatric study for Macrilen (macimorelin).
Consolidated Financial Statements and Management’s Discussion and Analysis
For reference, the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fourth quarter and fiscal 2018, as well as the Company’s audited consolidated financial statements as at December 31, 2018, 2017 and for the years ended December 31, 2018, 2017 and 2016 will be available at www.zentaris.com in the "Investors" section or at the Company’s profile at www.sedar.com and www.sec.gov.
Annual and Special Meeting of Shareholders
The Company has scheduled its annual shareholders meeting for 10:00 am (Eastern time) on May 8, 2019 at 1155 René-Lévesque Blvd. West, 41st Floor, Montreal, Quebec. At that meeting, in addition to the presentation of the Company’s annual financial statements, the election of directors and the appointment of the Company’s auditors, shareholders will also consider resolutions to move the Company’s registered address from Quebec to Ontario, and to renew and amend the Company’s existing shareholders rights plan. These matters are described in detail in the Company’s 2019 Management Proxy Circular. This proxy circular and a copy of the proposed amended and restated shareholders rights plan will be available at www.sedar.com and www.sec.gov.
At the Company’s 2019 annual and special meeting, the Company will be proposing that the size of its board of directors be reduced from seven to five, with Mr. Mike Cardiff having resigned from the board of directors for personal reasons in March 2019 and Mr. Juergen Ernst having indicated to the Company his desire not to be nominated for re-election. The Company thanks both of them for their service to the Company.