F-1 1 formf-1.htm

 

As filed with the Securities and Exchange Commission on February 15, 2024

 

Registration No. 333-___________

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM F-1

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

AETERNA ZENTARIS INC.

(Exact name of Registrant as specified in its charter)

 

Not Applicable

(Translation of Registrant’s name into English)

 

Canada   2834   Not Applicable
(State or other jurisdiction of
incorporation or organization)
 

(Primary Standard Industrial

Classification Code Number)

  (I.R.S. Employer
Identification Number)

 

315 Sigma Drive

Summerville, South Carolina 29486

(843) 900-3223

(Address, including zip code, and telephone number, including area code, of
Registrant’s principal executive offices)

 

Klaus Paulini, PhD

President and Chief Executive Officer

Aeterna Zentaris Inc.,

c/o Norton Rose Fulbright Canada, LLP,

222 Bay Street, Suite 3000,

PO Box 53, Toronto ON M5K 1E7, Canada

(843) 900-3211

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

 

Janet Grove, Esq.

Trevor Zeyl, Esq.

Norton Rose Fulbright Canada LLP

222 Bay Street, Suite 3000, P.O. Box 53,

Toronto ON M5K 1E7

Canada (416) 216-4792

Scott Saks, Esq.

Norton Rose Fulbright US LLP

1301 Avenue of the Americas

New York, New York 10019-6022

United States

(212) 318-3151

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company ☐

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.

 

 

 

 
 

 

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

 

SUBJECT TO COMPLETION, DATED February 15, 2024

 

PRELIMINARY PROSPECTUS

 

 

Up to 2,534,424 Aeterna Zentaris New Warrants

 

Up to 2,534,424 Common Shares

 

This prospectus relates to the issuance for no consideration of up to 2,534,424 common share purchase warrants (“Aeterna Zentaris New Warrants”) to all of the holders (the “Aeterna Shareholders”) of common shares, no par value per share (“Common Shares”), of Aeterna Zentaris Inc. (“Aeterna Zentaris”, “we”, “us”, “our” or the “Company”), and all of the holders (the “Aeterna Warrant Holders”) of our outstanding warrants to purchase Common Shares (“Aeterna Zentaris Adjusted Warrants”). Of the 2,534,424 Aeterna Zentaris New Warrants being issued, (i) 2,316,137 Aeterna Zentaris New Warrants are being issued to Aeterna Shareholders and (ii) 218,287 Aeterna Zentaris New Warrants are being issued to Aeterna Warrant Holders. This prospectus also relates to the up to 2,534,424 Common Shares issuable from time to time upon exercise of the Aeterna Zentaris New Warrants. We refer to the Common Shares issued or issuable upon exercise of the Aeterna Zentaris New Warrants, and the Aeterna Zentaris New Warrants being offered hereby, collectively, as the “securities.”

 

We are issuing the Aeterna Zentaris New Warrants to Aeterna Shareholders and Aeterna Warrant Holders in connection with our acquisition of all of the issued and outstanding common shares in the capital of Ceapro Inc., a corporation existing under the federal laws of Canada (“Ceapro”), pursuant to a plan of arrangement (the “Plan of Arrangement”) in accordance with an arrangement agreement, dated December 14, 2023, between the Company and Ceapro, as amended by the amendment agreement, dated January 16, 2024, between the Company and Ceapro (as so amended and may be further amended, supplemented or otherwise modified from time to time, the “Arrangement Agreement”).

 

In connection with the Plan of Arrangement, we are also issuing (i) up to 7,390,093 Common Shares (the “Aeterna Plan Shares”) to the holders of Ceapro’s outstanding common shares (“Ceapro Shares”), other than dissenting holders of Ceapro Shares who dissent, and (ii) replacement options (the “Replacement Options”) exercisable for up to 271,672 Common Shares in exchange for outstanding options to purchase Ceapro common shares that Ceapro issued pursuant to its employee plans (“Ceapro Options”), in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 3(a)(10) promulgated thereunder. This prospectus does not relate to, and is not an offer to acquire, any of the Aeterna Plan Shares or Replacement Options, or any Common Shares issuable upon exercise of Replacement Options.

 

No Common Shares issuable upon exercise of Replacement Options will be issued or sold in the United States absent registration or an exemption from registration. Any public offering of Common Shares issuable upon exercise of Replacement Options in the United States will be made by means of a separate prospectus that may be obtained from us.

 

 
 

 

Each Aeterna Zentaris New Warrant will be exercisable, subject to adjustment, for one (1) Common Share at an exercise price of $0.01 per Common Share, will be exercisable at any time after the date of issuance and will expire three years from the date of issuance. The exercise price is paid on a cashless basis meaning that the number of Common Shares will be reduced by an amount equal to the aggregate exercise price of the Aeterna Zentaris New Warrants being exercised. Each Common Share (including Common Shares underlying the Aeterna Zentaris New Warrants) offered under this prospectus has associated with it one right to purchase a Common Share under our Rights Plan (as defined herein). Please see the section entitled “Description of Securities We are Offering” in this prospectus for a more detailed discussion.

 

Our Common Shares are currently listed on both the NASDAQ Capital Market (“NASDAQ”) and on the Toronto Stock Exchange (“TSX”) under the symbol “AEZS”. On February 13, 2024, the last reported sales price of our Common Shares on NASDAQ was $1.85 per share and on TSX was C$2.41 per share.

 

There is no established public trading market for the Aeterna Zentaris New Warrants, and we do not expect a market to develop. In addition, we do not intend to apply for a listing of the Aeterna Zentaris New Warrants on any national securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Aeterna Zentaris New Warrants will be limited.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

Investing in our securities involves a high degree of risk. Before making any decision to invest in our securities, you should carefully consider the information disclosed under “Risk Factors” beginning on page 16 of this prospectus, as well as those risk factors otherwise contained or incorporated by reference into this prospectus.

 

The securities offered by this prospectus have not been qualified in Canada and may not be offered or sold in Canada except pursuant to a Canadian prospectus or an exemption from the prospectus requirements under applicable Canadian securities laws. The Company has not filed and does not intend to file a Canadian prospectus in connection with the securities offered by this prospectus.

 

Delivery of the securities is expected to be made on or about, 2024, subject to customary closing conditions and the closing of the Plan of Arrangement.

 

The date of this prospectus is           , 2024

 

 
 

 

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS 1
   
PROSPECTUS SUMMARY 2
   
THE OFFERING 13
   
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS 15
   
RISK FACTORS 16
   
USE OF PROCEEDS 30
   
DIVIDEND POLICY 30
   
CAPITALIZATION 30
   
SELECTED HISTORICAL FINANCIAL INFORMATION OF AETERNA ZENTARIS 31
   
SELECTED HISTORICAL FINANCIAL INFORMATION OF CEAPRO 33
   
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION OF THE COMBINED COMPANY 35
   
THE PLAN OF ARRANGEMENT 52
   
INFORMATION CONCERNING AETERNA ZENTARIS 95
   
INFORMATION CONCERNING CEAPRO 100
   
INFORMATION CONCERNING THE COMBINED COMPANY 128
   
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY 136
   
INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS IN THE PLAN OF ARRANGEMENT 139
   
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 141
   
DESCRIPTION OF SHARE CAPITAL 142
   
DESCRIPTION OF WARRANTS WE ARE OFFERING 143
   
INCOME TAX CONSIDERATIONS 145
   
PLAN OF DISTRIBUTION 156
   
EXPENSES OF THE OFFERING 158
   
LEGAL MATTERS 158
   
EXPERTS 158
   
ENFORCEABILITY OF CIVIL LIABILITIES 158
   
WHERE YOU CAN FIND MORE INFORMATION 159
   
DOCUMENTS INCORPORATED BY REFERENCE 159
   
GLOSSARY OF TERMS 160
   
ANNEX A - FINANCIAL STATEMENTS OF CEAPRO INC. A-1
   
ANNEX B – MANAGEMENT’S DISCUSSION AND ANALYSIS OF CEAPRO FOR INTERIM NINE MONTH PERIOD ENDED SEPTEMBER 30, 2023 AND 2022 B-1
   
ANNEX C- MANAGEMENT’S DISCUSSION AND ANALYSIS OF CEAPRO FOR THREE YEAR PERIOD ENDED DECEMBER 31, 2022 C-1
   
ANNEX D – FAIRNESS OPINION OF RAYMOND JAMES & ASSOCIATES, INC. D-1

 

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ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement on Form F-1 that we filed with the SEC under the Securities Act of 1933, as amended, or the Securities Act. This prospectus does not contain all of the information included in the registration statement. For further information, we refer you to the registration statement, including its exhibits, filed with the SEC. Statements contained in this prospectus about the contents of any document are not necessarily complete. If SEC rules require that a document be filed as an exhibit to the registration statement, please see such document for a complete description of these matters.

 

The SEC allows us to “incorporate by reference” information into this prospectus and the registration statement of which this prospectus is a part, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus, any accompanying prospectus supplement, any subsequently filed document deemed incorporated by reference or any free writing prospectus prepared by or on behalf of us. This prospectus incorporates by reference the Annual Report on Form 20-F, as amended, we filed with the SEC as well as certain Current Reports on Form 6-K we have furnished and filed with the SEC.

 

References in this prospectus to the “Original Form 20-F” are to our Annual Report on Form 20-F for the year ended December 31, 2022 filed with the SEC on March 23, 2023, which is incorporated herein by reference.

 

References in this prospectus to the “20-F Amendment” are to Amendment No. 1 to our Original Form 20-F on Form 20-F/A filed with the SEC on February 15, 2024, which is incorporated herein by reference.

 

References in this prospectus to the “Form 20-F” are to our Original Form 20-F, as amended by our 20-F Amendment, which are incorporated herein by reference as so amended.

 

References in this prospectus to the “Nine Month 6-K” are to our Current Report on Form 6-K filed with the SEC on November 11, 2023, which is incorporated by reference herein.

 

The full list of documents incorporated by reference into this prospectus and the registration statement of which this prospectus is a part are identified under the headings “Documents Incorporated by Reference.” Before purchasing any securities, you should carefully read this prospectus in its entirety, together with the additional information described under the headings, “Documents Incorporated by Reference” and “Where You Can Find Additional Information” in this prospectus.

 

This prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus in any jurisdiction or in any circumstances where it is unlawful to make such offer or solicitation. We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. If anyone provides you with different or inconsistent information, you should not rely on it. When you make a decision about whether to invest in our securities, you should not rely upon any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf.

 

You should assume that the information contained in this prospectus and the documents incorporated by reference herein is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates. If any statement in this prospectus is inconsistent with a statement in another document having a later date—for example, a prospectus supplement filed after the date of this prospectus—the statement in the document having the later date modifies or supersedes the earlier statement.

 

Except as otherwise indicated, the information concerning Ceapro contained in this prospectus is based solely on information provided to Aeterna Zentaris by Ceapro or is taken from, or is based upon, publicly available information. Information concerning Ceapro should be read together with, and is qualified by, the documents and information related to Ceapro incorporated by reference herein. In the Arrangement Agreement, Ceapro provided a covenant to ensure that no information provided by it in connection with this prospectus will include any misrepresentation or omit to state a material fact required to be stated in this prospectus in order to make such information not misleading in light of the circumstances in which it is disclosed. Although we have no knowledge that would indicate that any of the information provided by Ceapro is untrue or incomplete, neither we nor any of our officers or directors assumes any responsibility for the failure by Ceapro to disclose facts or events which may have occurred or may affect the completeness or accuracy of such information but which are unknown to us. We have no knowledge of any material information concerning Ceapro that has not been generally disclosed.

 

In this prospectus, unless otherwise indicated, references to “we”, “us”, “our”, “Aeterna Zentaris” the “Corporation” or the “Company” are to Aeterna Zentaris Inc., a Canadian corporation, and its consolidated subsidiaries, prior to consummation of the Plan of Arrangement, unless it is clear that such terms refer only to Aeterna Zentaris Inc. excluding its subsidiaries.

 

In this prospectus, unless otherwise indicated, references to “Ceapro” are to Ceapro Inc., a corporation existing under the federal laws of Canada, and its consolidated subsidiaries, prior to consummation of the Plan of Arrangement, unless it is clear that such terms refer only to Ceapro Inc. excluding its subsidiaries.

 

In this prospectus, unless otherwise indicated, references to the “Combined Company” are to means Aeterna Zentaris, and its consolidated subsidiaries, after the completion of the Plan of Arrangement, unless it is clear that such terms refer only to Aeterna Zentaris, excluding its subsidiaries, after the completion of the Plan of Arrangement.

 

Capitalized terms used in this prospectus and not otherwise defined herein have the meaning set out in the Glossary of Defined Terms set forth below.

 

The financial statements included in or incorporated by reference into this prospectus have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), and thus may not be comparable to financial statements of United States (“U.S.”) companies.

 

Certain information presented in this prospectus, including certain documents incorporated by reference herein, may include non-IFRS measures that are used by us as indicators of financial performance. These financial measures do not have standardized meanings prescribed under IFRS and our computation may differ from similarly-named computations as reported by other entities and, accordingly, may not be comparable. These financial measures should not be considered as an alternative to, or more meaningful than, measures of financial performance as determined in accordance with IFRS as an indicator of performance. We believe these measures may be useful supplemental information to assist investors in assessing our operational performance and our ability to generate cash through operations. The non-IFRS measures also provide investors with insight into our decision making as we use these non-IFRS measures to make financial, strategic and operating decisions.

 

Unless otherwise stated, currency amounts in this prospectus are stated in United States dollars, or “$” or “US$”. All references to “C$” are to Canadian dollars.

 

Aeterna Zentaris’ historical financial statements are presented in US dollars and Ceapro’s historical financial statements are presented in Canadian dollars. Unless otherwise indicated, all monetary information included or incorporated by reference in this prospectus related to Aeterna Zentaris is presented in US dollars and all monetary information in this prospectus related to Ceapro is presented in Canadian dollars.

 

The unaudited pro forma condensed consolidated financial information of the Combined Company included in this prospectus is presented in Canadian dollars. Aeterna Zentaris’ financial statements were translated from US dollars to Canadian dollars in the unaudited pro forma condensed consolidated statement of financial position of the Combined Company as at September 30, 2023 at a spot exchange rate of C$1.3520 = US$1.00. Aeterna Zentaris’ financial statements were translated from US dollars to Canadian dollars in the statement of income (loss) of the Combined Company at the average exchange rate of C$1.3056 = US$1.00 for the year ended December 31, 2022 and at the average exchange rate of C$1.3486 = US$1.00 for the nine months ended September 30, 2023.

 

It has not yet been determined which currency the Combined Company’s financial statements will be presented if the Plan of Arrangement is consummated.

 

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PROSPECTUS SUMMARY

 

This summary highlights selected information about us, Ceapro, the Plan of Arrangement, this offering and information contained in greater detail elsewhere in this prospectus and in the documents incorporated by reference herein. This summary is not complete and does not contain all of the information that you should consider before investing in our securities. You should carefully read and consider this entire prospectus and the documents, and information incorporated by reference into this prospectus, including the financial statements and related notes of Aeterna Zentaris and Ceapro, the unaudited pro forma combined consolidated financial statements and “Risk Factors,” before making an investment decision. If you invest in our securities, you are assuming a high degree of risk.

 

Aeterna Zentaris

 

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 FDA and EMA approved oral test indicated for the diagnosis of patients with AGHD. Macimorelin is currently marketed under the tradename Ghryvelin™ in the European Economic Area and under the tradename “Macimorelin 60 mg granules for oral suspension in sachet” in the UK through an exclusive licensing agreement with Atnahs Pharma UK Ltd. (“Pharmanovia”). Aeterna Zentaris’ 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. Aeterna Zentaris is actively pursuing business development opportunities for the commercialization of macimorelin in North America, Asia and the rest of the world. We are also leveraging the clinical success and compelling safety profile of macimorelin to develop the compound for the diagnosis of CGHD, an area of significant unmet need.

 

Aeterna Zentaris is also dedicated to the development of therapeutic assets and has established a pre-clinical pipeline to potentially address unmet medical needs across a number of indications, with a focus on rare or orphan, including neuromyelitis optica spectrum disorder and Parkinson’s disease, chronic hypoparathyroidism and ALS (Lou Gehrig’s Disease).

 

Corporate Information

 

Aeterna Zentaris was incorporated on September 12, 1990 under the CBCA and continues to be governed by the CBCA. Our registered address is located at 222 Bay St., Suite 3000, Toronto, Ontario, Canada M5K 1E7 c/o Norton Rose Fulbright Canada LLP and we operate another office located at 315 Sigma Drive, Summerville, South Carolina 29486; our telephone number is +1 (843) 900-3223 and our website is www.zentaris.com. None of the documents or information found on our website shall be deemed to be included in or incorporated by reference into this prospectus, unless such document is specifically incorporated herein by reference as provided under “Documents Incorporated by Reference.” For additional information with respect to Aeterna Zentaris please refer to our Form 20-F, which is incorporated herein by reference.

 

In May 2004, we changed our name to Aeterna Zentaris Inc. On July 15, 2022, we completed the 25-to-1 2022 share consolidation (reverse stock split) and, previously, on November 17, 2015, we also completed 100-to-1 share consolidation (reverse stock split). Our Common Shares commenced trading on a consolidated and adjusted basis on both the NASDAQ and the TSX on November 20, 2015.

 

We currently have three wholly-owned direct and indirect subsidiaries: Aeterna Zentaris GmbH (“AEZS Germany”), based in Frankfurt am Main, Germany and incorporated under the laws of Germany; Zentaris IVF GmbH, a direct wholly-owned subsidiary of AEZS Germany based in Frankfurt am Main, Germany and incorporated under the laws of Germany; and Aeterna Zentaris, Inc., an entity incorporated in the State of Delaware with an office in the Charleston, South Carolina area in the U.S.

 

Plan of Arrangement with Ceapro

 

On December 14, 2023, Aeterna Zentaris entered into an Arrangement Agreement with Ceapro, pursuant to which Aeterna Zentaris and Ceapro agreed that, subject to the terms and conditions set forth in the Arrangement Agreement, including the receipt of the approval of the stockholders of Aeterna Zentaris and Ceapro, the final order of the Court of King’s Bench of Alberta and certain regulatory and exchange approvals described below, on the Effective Date Aeterna Zentaris will acquire 100 percent of the Ceapro Shares pursuant to a company-approved plan of arrangement under the Canada Business Corporations Act (the “CBCA”) such that Ceapro will become a wholly-owned subsidiary of Aeterna Zentaris and Aeterna Zentaris will continue the operations of Aeterna Zentaris and Ceapro on a combined basis (the “Arrangement”). The terms of the Arrangement Agreement were the result of arm’s length negotiation between Aeterna Zentaris and Ceapro and their respective advisors.

 

If completed, the Plan of Arrangement will result in Aeterna Zentaris acquiring all of the issued and outstanding Ceapro Shares on the Effective Date, and Ceapro will become a wholly-owned subsidiary of Aeterna Zentaris and Aeterna Zentaris will continue the operations of Aeterna Zentaris and Ceapro on a combined basis.

 

On the Effective Date, existing Shareholders and former Ceapro Shareholders would own approximately 50% of the outstanding Common Shares assuming the exercise of all of the Aeterna Zentaris New Warrants and based on the number of Common Shares and Ceapro Shares issued and outstanding as of market close on December 13, 2023. For further information regarding the Combined Company, see section entitled “Information Concerning the Combined Company”.

 

 

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Aeterna Zentaris has applied to list all of its Common Shares issuable upon the exercise of the Aeterna Zentaris New Warrants on the TSX and has filed an initial listing application with the Nasdaq as the exchange has determined that the Plan of Arrangement constitutes a “change of control” under its rules and regulations. The parties intend to rely upon the exemption from the registration requirements of the U.S. Securities Act pursuant to Section 3(a)(10) thereof and applicable state securities laws with respect to the issuance of the Consideration Shares and the Replacement Options pursuant to the Plan of Arrangement.

 

Following closing, Aeterna Zentaris and Ceapro have agreed to use their commercially reasonable efforts to delist the Ceapro Shares from the TSXV promptly following the Effective Date. Aeterna Zentaris and Ceapro also intend to apply for a decision for Ceapro to cease to be a reporting issuer under the Securities Laws of each jurisdiction of Canada in which it is a reporting issuer, if permitted by applicable Laws.

 

The Arrangement Agreement contains customary representations and warranties and is subject to customary conditions to closing and other restrictive covenants, including, but not limited to, the following:

 

  Directors and Officers: Upon the occurrence of the Plan of Arrangement, effective as of the Effective Date, certain directors of Aeterna Zentaris will resign, the number of director seats on the Aeterna Zentaris Board will be increased and nominees of Ceapro will be appointed to fill such vacancies on the Aeterna Zentaris Board, to the extent permitted by law. Furthermore, Aeterna Zentaris will appoint a new Chief Executive Officer as of the Effective Date.
     
  Non-Solicitation: Subject to certain exceptions, neither party will solicit or assist in the initiation of proposals that could result in an Acquisition Proposal by a third-party.
     
  Notification of Proposals: A Party that receives an acquisition solicitation has to notify the other Party within 24 hours of its receipt of such solicitation and must provide certain information and details relating to such acquisition solicitation.
     
  Superior Proposal: Notwithstanding other restrictions contained in the Plan of Arrangement, in the event a Party receives a superior proposal from a third-party, such Party may, subject to compliance with the terms of the Plan of Arrangement, enter into a definitive agreement with a party providing for an Acquisition Proposal so long as such Acquisition Proposal constitutes a Superior Proposal.
     
  Termination of Arrangement Agreement: The parties may terminate the Arrangement Agreement upon the occurrence of certain conditions, and in any event, if the Effective Date has not occurred on or before June 14, 2024.
     
  Termination Fees: Upon the occurrence of certain termination events pursuant to the terms of the Arrangement Agreement, Aeterna Zentaris shall be entitled to a fee of US$500,000 to be paid by Ceapro within the time(s) specified in the Arrangement Agreement in respect to each termination event.

 

For additional information with respect to the representations and warranties, conditions to closing and other terms in the Plan of Arrangement please refer to the section entitled “The Plan of Arrangement – Principal Terms of the Plan of Arrangement” and to the Arrangement Agreement incorporated by reference as Exhibit 2.1 to the registration statement of which this prospectus forms a part.

 

On December 14, 2023, each of the directors and officers of Aeterna Zentaris and Ceapro entered into lock-up agreements, the forms of which is attached to the Arrangement Agreement, pursuant to which, among other things, they have agreed to vote in favor of the Arrangement Agreement.

 

 

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Reason for the Plan of Arrangement

 

In reaching its conclusions and formulating its recommendation, the Aeterna Zentaris Board (excluding the Aeterna Zentaris Non-Participating Director) reviewed a significant amount of technical, financial and operational information relating to Ceapro and Aeterna Zentaris and considered a number of factors and reasons, including those listed below. The following is a summary of the principal reasons for the unanimous determination of the Aeterna Zentaris Board that the Plan of Arrangement is in the best interests of Aeterna Zentaris and the unanimous recommendation of the Aeterna Zentaris Board (excluding the Aeterna Zentaris Non-Participating Director) that Shareholders vote in favor of the Issuance Resolution.

 

  Greater potential for stable cashflow to support R&D of potentially higher return pharmaceutical products. Ceapro currently generates revenues from two main active ingredients, oat beta glucan and avenanthramides, extracted and purified using its proprietary technology. Cash from these products are planned to be used along with Aeterna Zentaris’ revenue from the commercialization or licensing of the macimorelin product to support the development of the Combined Company’s roster of high potential-return products, ideally creating growing and sustainable revenue for the Combined Company and our combined investors.
     
  Greater diversification of commercial and development product pipeline lowers risk. The Combined Company is expected to benefit from an extensive and diversified pipeline of innovative products in development, including Ceapro’s quicker to market biotechnology products and Aeterna Zentaris’ potentially higher return, but longer-horizon, products. With this pipeline rejuvenation, the Combined Company is anticipated to boast:

 

    (i) more products in the pipeline that are closer to potential commercialization;
       
    (ii) an enhanced ability to strategically focus financial and company resources in a manner that provides the most value to the Combined Company and shareholders; and
       
    (iii) a more compelling value proposition and lower risk profile.

 

  Expanded pharmaceutical research and development capabilities. Both Aeterna Zentaris and Ceapro bring deep expertise and knowledge that are expected to play a key role in advancing the Combined Company and development pipeline. The Combined Company will have the infrastructure to support development activities and potentially offer improved efficiencies, in addition to cost savings. The Combined Company, we will also have an expanded development pipeline of products which we are committed to prioritizing as we evaluate what will provide the best overall potential for the Combined Company, shareholders and consumers.
     
  Compelling North American + European combination. Ceapro has an operational presence in North America, which addresses another strategic consideration for Aeterna Zentaris, a Canadian company on North American markets but whose current operational footprint is largely European. While we expect to continue to maintain some presence in Europe, we believe Aeterna Zentaris needs to re-focus operations within the North American biotechnology market. We believe that combining with Ceapro, a company with an established presence in North America, provides better exposure to potential new investors, business development opportunities and talent.
     
  Expertise and efficiencies. Both companies have expertise that can build upon each other, which is expected to result in a stronger Combined Company. For example, Aeterna Zentaris is adept at navigating the conduct of human clinical trials and the crucial regulatory approval process required to bring pharmaceutical products to market. The Combined Company plans to leverage this expertise with the higher value pharmaceutical opportunities being advanced by Ceapro for its active ingredients and technologies.

 

 

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  Raymond James Fairness Opinion. The Aeterna Zentaris Strategic Committee and the Aeterna Zentaris Board received an opinion from Raymond James dated December 14, 2023, as to the fairness to the Shareholders, from a financial point of view, of the consideration to be paid by Aeterna Zentaris under the Plan of Arrangement, based upon and subject to the assumptions, limitations and qualifications set forth therein. A complete copy of the Raymond James Fairness Opinion is included as Annex D to this prospectus.
     
  Dual-listing expected to improve trading volume and capital market profile. Shareholders of Aeterna Zentaris and Ceapro Shareholders will share in future value creation, with existing shareholders of Aeterna and Ceapro, assuming the exercise of the Aeterna Zentaris New Warrants, to each own approximately 50% of the Combined Company, respectively. The dual Nasdaq and TSX listing is expected to provide additional volume and an improved capital market profile for the Combined Company.
     
  Strengthened combined balance sheet. The Combined Company will be well-capitalized to support ongoing commercial operations while strategically investing in product research and development to advance differentiated, innovative products.
     
  Bolsters financial strength and capital markets profile. The pro forma cash balance of the Combined Company as at September 30, 2023 of C$57 million, with increased public float, liquidity, and access to capital, is expected to provide Aeterna Zentaris with greater capacity to pursue further growth and return capital to Shareholders.
     
  Accretive transaction. The Plan of Arrangement is expected to deliver cash flow per share and net asset value per share accretion to Aeterna Zentaris.
     
  Management strength and integration. Aeterna Zentaris will benefit from the integration of business leadership with extensive experience, bringing together the proven strengths and capabilities and focus on delivering increased value to shareholders. The Combined Company will also provide a platform to recruit qualified successors at both the management and board levels that will drive the success of the Combined Company.
     
  Synergies. The complementary nature of Ceapro’s and Aeterna Zentaris’ combined asset base is expected to provide significant upside, increased diversification, less risk and the potential for improved efficiencies. The Combined Company would also be able to exploit any overlap in administrative functions and expenses that result from the Plan of Arrangement. The Combined Company is expected to be a long-term sustainable business, which is optimally positioned to deliver value to shareholders as the biopharma sector recovers from its current trough.

 

Effect of the Issuance Resolution

 

Upon completion of the Plan of Arrangement, Aeterna Zentaris expects to issue the following Consideration Shares, Replacement Options and Aeterna Zentaris New Warrants:

 

Purpose  Number of Common Shares   Percent of Common Shares of Combined Company(4) 
Consideration Shares to Ceapro Shareholders(1)    7,390,093    50.00%
Common Shares upon exercise of Replacement Options(2)    271,672    1.84%
Common Shares upon exercise of Aeterna Zentaris New Warrants‌(3)   2,534,424    17.15%

 

Notes:

 

(1) Assumes that (i) no Ceapro Shareholders have exercised their Dissent Rights, and (ii) there are 78,293,177 Ceapro Shares issued and outstanding.
(2) Assumes that there are 2,878,666 Ceapro Options issued and outstanding immediately prior to the completion of the Plan of Arrangement.
(3) Assumes that there are 4,855,876 Common Shares and 457,648 Aeterna Zentaris Adjusted Warrants issued and outstanding immediately prior to the completion of the Plan of Arrangement.
(4) Assumes that there are 14,780,393 Common Shares of the Combined Company issued and outstanding immediately upon the completion of the Plan of Arrangement, including the exercise of all the Aeterna Zentaris New Warrants (but excluding the exercise of the Replacement Options).

 

 

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As set forth below, Shareholders and former Ceapro Shareholders are each expected to own approximately 50% of the issued and outstanding Common Shares of the Combined Company immediately following completion of the Plan of Arrangement, assuming the exercise of all of the Aeterna Zentaris New Warrants and based on the number of Common Shares and Ceapro Shares issued and outstanding as of market close on December 13, 2023. See section entitled “Information Concerning the Combined Company”.

 

  

Number of Common Shares

  

Percent of Common Shares of Combined Company(4)

 
Common Shares held by current Shareholders(1)    4,855,876    32.85%
Common Shares upon exercise of Aeterna Zentaris New Warrants to be held by current Shareholders and current holders of Aeterna Zentaris Adjusted Warrants(1)(2)    2,534,424    17.15%
Total:   7,390,300    50.00%
Consideration Shares to be held by Ceapro Shareholders(3)    7,390,093    50.00%

 

Notes:

 

(1) Assumes that there are 4,855,876 Common Shares issued and outstanding immediately prior to the completion of the Plan of Arrangement.
(2) Assumes that there are 457,648 Aeterna Zentaris Adjusted Warrants issued and outstanding immediately prior to the completion of the Plan of Arrangement.
(3) Assumes that (i) there are no Ceapro Shareholders who have exercised their Dissent Rights, and (ii) there are 78,293,177 Ceapro Shares issued and outstanding.
(4) Assumes that there are 14,780,393 Common Shares of the Combined Company issued and outstanding immediately upon the completion of the Plan of Arrangement, including the exercise of all the Aeterna Zentaris New Warrants (but excluding the exercise of the Replacement Options).

 

Ceapro

 

Ceapro is a Canadian biopharmaceutical company involved in the development and commercialization of “active ingredients” derived from oats and other renewable plant resources for healthcare and cosmetic industries.

 

Over the last decade, Ceapro’s development projects have focused on its expertise in oats and developing new innovative natural health care products to address global needs. However, in order to exploit these opportunities, numerous challenges must be overcome, including securing adequate and quality feedstock, developing proper formulations, achieving manufacturing scale-up, and completing scientific testing. Ceapro’s dedicated team is constantly focused on overcoming these challenges to stay profitable and ahead of competitors by successfully fine-tuning and implementing proprietary enabling technologies.

 

 

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Ceapro has one reportable operating segment and revenue stream, being the operations relating to the active ingredient product technology industry. The active ingredient product technology industry involves the development of proprietary extraction technologies and the application of these technologies to the production and development and commercialization of active ingredients derived from oats and other renewable plant resources for the healthcare and cosmetic industries.

 

Ceapro’s products include:

 

  a commercial line of natural active ingredients, including oat beta glucan, avenanthramides (colloidal oat extract), oat powder, oat oil, oat peptides and lupin peptides, which are marketed to the personal care, cosmetic, medical and animal health industries through Ceapro’s distribution partners and direct sales;
     
  a commercial line of natural anti-aging skincare products, utilizing active ingredients including oat beta glucan and avenanthramides, which are marketed to the cosmeceuticals market through Ceapro’s wholly-owned subsidiary, Juvente DC Inc.; and
     
  veterinary therapeutic products, including an oat shampoo, an ear cleanser and a dermal complex/conditioner, which are manufactured and marketed to veterinarians in Japan and Asia.

 

Other products and technologies are currently in the research and development or pre-commercial stage. These include:

 

  a potential platform using Ceapro’s beta glucan formulations to deliver compounds used for treatments in both the personal and healthcare sectors;
     
  a variety of novel enabling technologies including Pressurized Gas eXpanded drying technology which is currently being tested on oat and yeast beta glucan but may have application for multiple classes of compounds; and
     
  the development of new technologies to increase the content of avenanthramides to high levels to enable new innovative products to be introduced to new markets including functional foods, nutraceuticals and botanical drugs. High levels of avenanthramides enable the production of powder formulation for the potential commercialization of products such as enriched oat flour as a functional food and the production of pills and/or tablets as a potential botanical drug.

 

For additional information with respect to Ceapro and its business, please refer to the section entitled “Information About Ceapro” in this prospectus and in the public filings available on Ceapro’s issuer profile on SEDAR+ at www.sedarplus.ca.

 

Combined Company

 

Overview

 

On completion of the Plan of Arrangement, (i) Aeterna Zentaris will acquire all of the issued and outstanding Ceapro Shares and Ceapro will become a wholly-owned subsidiary of Aeterna Zentaris, and (ii) each of the current Shareholders, as a group, and the Ceapro Shareholders, as a group, are expected to own approximately 50% of the issued and outstanding Common Shares assuming the exercise of the Aeterna Zentaris New Warrants and based on the number of Common Shares and Ceapro Shares issued and outstanding as of December 14, 2023. As a result, all of the assets of Ceapro will become indirectly held by the Combined Company.

 

 

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Name and Corporate Status

 

Following the Plan of Arrangement, Aeterna Zentaris (the Combined Company) will continue to exist under the CBCA, and Ceapro will continue to exist under the CBCA.

 

Upon the closing of the Plan of Arrangement, the Combined Company will initially continue under the name “Aeterna Zentaris Inc.” and the Common Shares (including the Consideration Shares issued pursuant to the Plan of Arrangement and the Common Shares issued upon conversion of the Aeterna Zentaris New Warrants following the Plan of Arrangement) will be listed for trading on the TSX and the Nasdaq initially under the symbol “AEZS”.

 

Although the Arrangement Agreement originally contemplated that the name of Aeterna Zentaris be immediately changed upon the closing of the Plan of Arrangement and that approval of such name change be sought from the Aeterna Shareholders at the Meeting, Aeterna Zentaris and Ceapro have since decided that it would be preferable that, as part of the integration efforts to be undertaken following closing, the Combined Company Board will finalize the selection of a new name for the Combined Company, which will be presented to the shareholders of the Combined Company at the next annual general meeting, which is expected to be held in the months following closing.

 

The Combined Company will be a reporting issuer in all of the provinces of Canada and will file reports with the SEC under Section 13(a) of the U.S. Securities Exchange Act of 1934.

 

Anticipated Corporate Structure

 

The corporate chart below sets forth the Combined Company’s subsidiaries, each of which will be wholly-owned, and the jurisdiction of incorporation of each entity.

 

 

Description of the Combined Company

 

The Combined Company will combine Ceapro’s business relating to the development and commercialization of natural products for the personal care, cosmetic, human and animal health industries using proprietary technology and natural renewable resources, and to the development of innovative products, technologies and delivery systems with Aeterna Zentaris’ business relating to the development and commercialization of therapeutics and diagnostic tests.

 

The Combined Company is expected to have the following characteristics:

 

  Diversified commercial and development product pipeline. The Combined Company will benefit from an extensive and diversified pipeline of innovative products in development, including Ceapro’s quicker to market biotechnology products and Aeterna Zentaris’ potentially higher return, but longer-horizon, products. With this pipeline rejuvenation, the Combined Company is anticipated to boast:

 

    more products in the pipeline that are closer to potential commercialization;
       
    an enhanced ability to strategically focus financial and company resources in a manner that provides the most value to the Combined Company and shareholders; and

 

 

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    a more compelling value proposition and lower risk profile.

 

  Expanded pharmaceutical research and development capabilities. The Combined Company will have the established pharmaceutical research and development capabilities of both Aeterna Zentaris and Ceapro, as well as infrastructure to support development activities and potentially offer improved efficiencies in addition to cost savings.
     
  Greater potential for stable cashflow to support R&D of potentially higher return pharmaceutical products. Ceapro currently generates revenues from two main active ingredients, oat beta glucan and avenanthramides, extracted and purified using its proprietary technology. Cash flow from these products are planned to be used along with Aeterna Zentaris’ revenue from the commercialization or licensing of Aeterna Zentaris’ macimorelin product to support the development of the Combined Company’s roster of high potential-return products, ideally creating growing and sustainable revenue for the Combined Company and our combined investors.
     
  Stronger financial position and flexibility. The Combined Company will have increased financial flexibility with enhanced free cash flow and a strengthened balance sheet, with approximately C$57 million in unrestricted cash as of September 30, 2023 on a pro forma basis.
     
  Strengthened expertise and efficiencies. Both Aeterna Zentaris and Ceapro have expertise that can build upon each other, which is expected to result in a stronger Combined Company. For example, Aeterna Zentaris is adept at navigating the conduct of human clinical trials and the crucial regulatory approval process required to bring pharmaceutical products to market. The Combined Company plans to leverage this expertise with the higher value pharmaceutical opportunities being advanced by Ceapro for its active ingredients and technologies.
     
  North American + European operations. Ceapro has an operational presence in North America, while Aeterna Zentaris is a Canadian company that trades on North American markets but whose current operational footprint is largely European.

 

The business of the Combined Company and information relating to the Combined Company will be that of Aeterna Zentaris and Ceapro generally and as disclosed elsewhere in this prospectus, including, but not limited to, as further described in the section entitled “Information Concerning Ceapro” herein.

 

The head office of the Combined Company will be situated at 222 Bay St., Suite 3000, Toronto, Ontario, Canada M5K 1E7 c/o Norton Rose Fulbright Canada LLP.

 

The Combined Company will have its registered office located at 222 Bay St., Suite 3000, Toronto, Ontario, Canada M5K 1E7 c/o Norton Rose Fulbright Canada LLP.

 

Description of Share Capital

 

The authorized share capital of the Combined Company will continue to be as described in section entitled “Information Concerning Aeterna Zentaris” and the rights and restrictions of the Common Shares will remain unchanged.

 

Combined Company Shareholders and Principal Shareholders

 

The issued share capital of the Combined Company will change as a result of the consummation of the Plan of Arrangement to reflect the issuance of the Common Shares contemplated in the Plan of Arrangement. Based on the outstanding securities of Ceapro as of December 14, 2023, and without giving effect to the Consolidation, it is expected that Aeterna Zentaris will issue up to a maximum of 10,196,189 Common Shares in connection with the Plan of Arrangement (including the Consideration Shares and the Common Shares to be issued in respect of the Replacement Options and the Aeterna Zentaris New Warrants). If no outstanding Ceapro Options have been exercised prior to the Effective Time, and without giving effect to the consolidation, 271,672 Common Shares are expected to be reserved for issuance upon the exercise of the Replacement Options and 2,534,424 Common Shares are expected to be reserved for issuance upon the exercise of the Aeterna Zentaris New Warrants.

 

 

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On completion of the Plan of Arrangement, assuming that the current number of Common Shares and Ceapro Shares outstanding does not change from the date hereof and that no Ceapro Shareholders have exercised their Dissent Rights and not including the exercise of any Aeterna Zentaris New Warrants, it is expected that there will be 12,245,969 Common Shares issued and outstanding. Up to a maximum of 3,514,064 Common Shares will be issuable upon the exercise of outstanding convertible securities of Aeterna Zentaris, including, without limitation, the Replacement Options and the Aeterna Zentaris New Warrants to be issued pursuant to the Plan of Arrangement. On completion of the Plan of Arrangement, assuming that the current number of convertible securities of Aeterna Zentaris and Ceapro does not change from the respective dates of the information provided herein, and without giving effect to the Consolidation, it is expected that the total number of Common Shares issued and outstanding will be 15,760,033 on a fully-diluted basis.

 

To the knowledge of the directors and executive officers of Aeterna Zentaris as of the date of this prospectus, no person will beneficially own, or control or direct, directly or indirectly, voting securities of Aeterna Zentaris carrying 10% or more of the voting rights attached to the Common Shares following completion of the Plan of Arrangement.

 

Estimated Available Funds and Principal Purposes

 

Based on the consolidated financial statements of Aeterna Zentaris and Ceapro, respectively, as of September 30, 2023, Aeterna Zentaris has estimated working capital of approximately C$50.9 million and Ceapro had estimated working capital of approximately C$16.4 million. Based on the unaudited proforma combined consolidated financial information of the Combined Company as of September 30, 2023 set forth herein, the Combined Company would have estimated working capital of approximately C$60.2 million upon completion of the Plan of Arrangement.

 

Aeterna Zentaris has historically had negative cash flow from operating activities and has historically incurred net losses but, based on current operations, the Combined Company expects to meet its cash needs for the twelve-month period following the date hereof. To the extent that the Combined Company has negative operating cash flows in future periods, it may need to deploy a portion of its existing working capital to fund such negative cash flows or raise additional funds through the issuance of additional equity securities, loan financing or other means. There is no assurance that additional capital or other types of financing will be available if needed or that these financings will be on terms at least as favourable to the Combined Company as those previously obtained, or at all. See section entitled “Risk Factors”.

 

Pro-Forma Consolidated Capitalization

 

The following table sets forth the capitalization of the Combined Company assuming the completion of the Plan of Arrangement, but without giving effect to the Consolidation.

 

   As at September 30, 2023 
   Actual   As Adjusted   As Adjusted 

(unaudited)

(in thousands, except per share data)
  (in US $, except share date)   (in US $, except share date)   (in C$, except share date) 
             
Number of Common Shares issued and outstanding   4,855,876    12,245,969    12,245,969 
                
Cash and cash equivalents   38,756    42,188    57,038 
                
Warrant liability   -    10    13 
Deferred share unit liability   -    278    376 
Total non-current liabilities   11,980    13,713    18,540 
Shareholders’ equity:               
Share capital   293,410    22,790    30,812 
Warrants   5,085    -    - 
Contributed surplus   90,682   3,663    4,952 
Retained earnings (Deficit)   (362,088)   18,915    25,573 
Accumulated other comprehensive income   (811)   -    - 
Total capitalization   38,258    59,369    80,266 

 

The number of our Common Shares that will be outstanding before the offering is based on 4,855,876 shares outstanding as of September 30, 2023, and excludes as of such date:

 

457,648 Common Shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of $21.76 per share;
53,400 Common Shares issuable upon the exercise of outstanding stock options at a weighted average exercise price of $12.51 per share;
303,250 Common Shares reserved for future issuance under our 2018 Long-Term Incentive Plan dated March 27, 2018;

 

 

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The number of our Common Shares that will be outstanding immediately after the offering and the acquisition is based on 12,245,969 shares outstanding as of September 30, 2023, and excludes as of such date:

 

457,648 Common Shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of $21.76 per share;
325,072 Common Shares issuable upon the exercise of outstanding stock options at a weighted average exercise price of $7.91 per share;
874,048 Common Shares reserved for future issuance under our 2018 Long-Term Incentive Plan dated March 27, 2018;
2,534,424 Common Shares issuable upon the exercise of Aeterna Zentaris New Warrants to be issued to investors in this offering at an exercise price of $0.01 per share;

 

Directors and Executive Officers

 

Following completion of the Plan of Arrangement, the Combined Company Board will be comprised of eight (8) directors. The directors of Combined Company will hold office until the next annual general meeting of Shareholders or until their respective successors have been duly elected or appointed, unless his or her office is vacated earlier in accordance with the articles of the Combined Company (being the articles of Aeterna Zentaris) or within the provisions of the CBCA.

 

Management of the Combined Company is expected to include executives from both Ceapro and Aeterna Zentaris. Gilles Gagnon, Ceapro’s current Chief Executive Officer, and Giuliano La Fratta, Aeterna Zentaris’ current Chief Financial Officer, will lead the Combined Company’s business following completion of the Plan of Arrangement as President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, respectively. Upon closing of the Plan of Arrangement and as a component of near-term integration efforts, it is expected that the Combined Company Board will assess the composition of the Combined Company’s executive officer team (aside from the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer) to determine which Ceapro and which Aeterna Zentaris executive officers will hold roles as executive officers of the Combined Company. Additional changes to the Combined Company Board and executive officers of the Combined Company may follow over the short, medium, and long-term as integration efforts progress and the Combined Company is in a better position to assess needs and recruit successors.

 

As of the Effective Date and assuming the exercise in full of the Aeterna Zentaris New Warrants, the Combined Company’s directors, President and Chief Executive Officer and Senior Vice President and Chief Financial Officer are expected to collectively hold 188,590 Common Shares (representing 1.28% of the total issued and outstanding Common Shares) as a group.

 

Other Recent Developments

 

Aeterna Zentaris

 

Macimorelin Commercialization Program

 

On March 15, 2023, with the Company’s consent, Consilient Health Limited (“Consilient” or “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. 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. To date, we have received total pricing milestone payments from CH of US$0.5 million (€0.5 million) relating to Ghryvelin™/Macimorelin 60 mg approved list prices in the United Kingdom, Germany and Spain. We shipped initial batches of macimorelin (Ghryvelin™/Macimorelin 60 mg) to Consilient in the first quarter of 2022. Consilient launched the product meanwhile in the United Kingdom, Sweden, Denmark, Finland, Germany and Austria. More EU countries are expected to follow pending re-imbursement negotiations. On April 19, 2022, we announced that the European Patent Office had issued a patent providing intellectual property protection of macimorelin in 27 countries within the European Union as well as additional European non-EU countries, such as the UK and Turkey, for macimorelin for use to diagnose growth hormone deficiency (“GHD”) in adults. In the meantime, the related Patent Cooperation Treaty patent application has been granted in Canada, Japan, South Korea, Eurasia and New Zealand.

 

 

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On May 9, 2023, the United States Patent and Trademark Office issued patent US11,644,474 to the Company protecting the use of macimorelin for the diagnosis of GHD in pediatrics.

 

Pipeline Expansion Opportunities

 

Please see Aeterna Zentaris’ management’s discussion and analysis for the three and nine months ended September 30, 2023 which is incorporated by reference herein for a summary of Aeterna Zentaris pipeline of expansion opportunities including:

 

  AIM Biologicals: Targeted, highly specific autoimmunity modifying therapeutics for the potential treatment of neuromyelitis optica spectrum disorder (NMOSD) and Parkinson’s disease.
     
  AEZS-150 – Delayed Clearance Parathyroid Hormone Fusion Polypeptides: Potential treatment for chronic hypoparathyroidism
     
  AEZS-130 – Macimorelin Pre-Clinical Program

 

Ceapro

 

Over the last three fully completed years, Ceapro’s financial results have been solid, with an average year over year sales growth of 13.7% from C$15.1 million in 2020 to C$17.2 million in 2021 and C$18.8 million in 2022, with respective net profit of C$1.9 million, C$3.4 million and C$4.4 million. As a sales breakdown, Avenanthramides represents 60-65%, oat beta glucan 15-20% and oat oil 10-15%. 90% of these sales are made through Symrise AG, a global supplier of fragrances, flavors, food nutrition, and cosmetic ingredients, with whom Ceapro has renewed on March 10, 2022 a supply and distribution agreement with this long-time partner (the “Symrise Agreement”). The Symrise Agreement includes 11 exclusive customers, with Johnson and Johnson (“J&J”) representing approximately 50% of Ceapro’s business. On September 28, 2022, J&J announced Kenvue as the name for a new company to be formed from the planned spin-off of their consumer division. Kenvue started to be publicly traded on May 4, 2023 and became fully independent on August 23, 2023. Ceapro’s results were impacted by this planned spin-off, with the first nine months ending on September 30, 2023 showing a sales decline of nearly 50% from C$15. million in 2022 to C$8.0 million for the same period in 2023. Given statements made on July 20, 2023 in a press release announcing the first financial results of Kenvue, it appears that Kenvue has put emphasis on improving supply chain productivity and benefitted from some stock piling from the previous year. On August 25, 2023, Ceapro announced the signing of an amendment to the Symrise Agreement. Pursuant to the amendment, Ceapro has extended the term of the agreement for two years to December 31, 2026. The extended agreement also includes the potential to launch a new formulation of oat beta glucan mostly targeting the Chinese market.

 

Ceapro fully completed a transition to its new state of the art manufacturing site at the end of 2020. Since then, the team has produced and shipped an average of 300 metric tons of active ingredients per year. Given new technologies being developed at large scale, Ceapro believes that it is well-positioned to significantly increase its production capacity and offer additional products like yeast beta glucan and alginate for the nutraceutical sector.

 

 

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THE OFFERING

 

The Common Shares   Up to 2,534,424 Common Shares issuable from time to time upon exercise of the Aeterna Zentaris New Warrants. Each Common Share (including Common Shares underlying the Aeterna Zentaris New Warrants) offered under this prospectus has associated with it one right to purchase a Common Share under our Rights Plan (as defined herein). Please see the section entitled “Description of Securities We are Offering” in this prospectus for a more detailed discussion.
     
Aeterna Zentaris New Warrants  

Each Aeterna Zentaris New Warrants will have an exercise price of US$0.01 per Common Share, will be exercisable at any time after the date of issuance and will expire on the third anniversary of the date of issuance. To better understand the terms of the Aeterna Zentaris New Warrants, you should carefully read the “Description of Securities We are Offering” section of this prospectus.

     
Offering Price   We are issuing the Aeterna Zentaris New Warrants to Aeterna Shareholders and Aeterna Warrant Holders for no consideration. The exercise price of the Aeterna Zentaris New Warrants for acquiring our Common Shares is US$0.01.
     
Exercise Price of Aeterna Zentaris New Warrants   Exercise of the Aeterna Zentaris New Warrants will be through a cashless exercise and no fractional Common Shares will be issued upon the exercise of Aeterna Zentaris New Warrants. Upon due exercise, each holder of Aeterna Zentaris New Warrants will receive a number of Common Shares equal to the aggregate number of Common Shares for which the Aeterna Zentaris New Warrants are exercised less the number of Common Shares that have an aggregate market price on the trading day on which such Aeterna Zentaris New Warrants are exercised that is equal to the Exercise Price for such Common Shares. All Aeterna Zentaris New Warrants must be exercised on a cashless basis.
     
Total Common Shares outstanding immediately after this offering and completion of the Plan of Arrangement   14,780,393 Common Shares, assuming that the maximum number of Aeterna Zentaris New Warrants offered by this prospectus are issued, all such Aeterna Zentaris New Warrants issued in this offering are exercised and the maximum number of our Common Shares are issued in the Plan of Arrangement, but excluding the exercise of the Replacement Options and our outstanding employment options and the Aeterna Zentaris Adjusted Warrants.
     
Use of Proceeds   We will not receive any proceeds from the issuance of the Aeterna Zentaris New Warrants to Aeterna Shareholders and Aeterna Warrant Holders. Because all Aeterna Zentaris New Warrants must be exercised on a cashless basis, we will also not receive any proceeds from the exercise of any Aeterna Zentaris New Warrants.

 

 

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NASDAQ Capital Market and TSX symbol  

On January 8, 2024, we have applied for our Common Shares following consummation of the Plan of Arrangement to be listed on the NASDAQ and the TSX initially under the symbol “AEZS.” It is a condition to the Plan of Arrangement for our Common Shares following consumption of the Plan of Arrangement to be approved for continuing listing on the Nasdaq and TSX.

 

The Aeterna Zentaris New Warrants being issued in this prospectus are not listed on any securities exchange and we do not intend to list the Aeterna Zentaris New Warrants on NASDAQ, TSX or any other national securities exchange or any other recognized trading system, and we do not expect a market to develop for the Aeterna Zentaris New Warrants. Without a trading market, the liquidity of the Aeterna Zentaris New Warrants will be limited.

     
Risk factors   Before deciding to invest in our securities, you should carefully consider the risks related to our business, this offering and our securities. See “Risk Factors” on page 16 of this prospectus.
     
Dividend Policy   We have never declared or paid any cash dividends on our Common Shares. We do not anticipate paying any cash dividends in the foreseeable future.

 

The number of Common Shares to be outstanding after this offering and the Plan of Arrangement is based on 12,245,969 Common Shares outstanding as of September 30, 2023 and excludes:

 

457,648 Common Shares issuable upon the exercise of outstanding Aeterna Zentaris Adjusted Warrants at a weighted average exercise price of $21.76 per share;
   
53,400 Common Shares issuable upon the exercise of outstanding employee stock options at a weighted average exercise price of $12.51 per share;
   
874,048 Common Shares reserved for future issuance under our 2018 Long-Term Incentive Plan dated March 27, 2018;
   
271,672 Common Shares issuable upon the exercise of Replacement Options to be issued to investors in this offering; and
   
2,534,424 Common Shares issuable upon the exercise of Aeterna Zentaris New Warrants to be issued to investors in this offering at an exercise price of $0.01 per share.

 

Unless otherwise stated, outstanding share information throughout this prospectus excludes such outstanding securities.

 

 

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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

 

The information in this prospectus and the exhibits attached hereto and incorporated herein by reference include forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, specifically Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements involve a number of known and unknown risks, uncertainties and other factors that could result in outcomes to be materially different from historical results or from any future results expressed or implied by such forward-looking statements.

 

Forward-looking statements include, but are not limited to, the ability of the Company and Ceapro to successfully consummate the Plan of Arrangement pursuant to the Arrangement Agreement within the time expected or at all and, if completed, the anticipated benefits and synergies as well as the assets, cost structure, financial position, cash flows and growth prospects of the Combined Company.

 

Factors that could cause actual results or outcomes to differ materially from expectations include, among others, the following:

 

  failure of the Company or Ceapro to receive shareholder approval;
  regulatory approval and securities exchange approvals, including from the Nasdaq and the TSX;
our ability to raise capital and obtain financing to continue our currently planned operations;
our ability to regain compliance with the continued listing requirements of the NASDAQ and to maintain listing of our Common Shares on the NASDAQ;
our ability to continue as a going concern, which is dependent, in part, on our ability to transfer cash from Aeterna Zentaris GmbH (“AEZS Germany”) to Aeterna Zentaris and the U.S. subsidiary and to secure additional financing;
our now heavy dependence on the success of Macrilen™ (macimorelin) and related out-licensing arrangements and the continued availability of funds and resources to successfully commercialize the product, including our heavy reliance on the success of the license and assignment agreement with Novo Nordisk A/S (“Novo”);
our ability to enter into out-licensing, development, manufacturing, marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect;
our reliance on third parties for the manufacturing and commercialization of Macrilen™ (macimorelin);
potential disputes with third parties, leading to delays in or termination of the manufacturing, development, out-licensing or commercialization of our product candidates, or resulting in significant litigation or arbitration;
uncertainties related to the regulatory process;
unforeseen global instability, including the instability due to the global pandemic of the novel coronavirus;
our ability to efficiently commercialize or out-license Macrilen™ (macimorelin);
our reliance on the success of the pediatric clinical trial in the European Union (“E.U.”) and U.S. for Macrilen™ (macimorelin);
the degree of market acceptance of Macrilen™ (macimorelin);
our ability to obtain necessary approvals from the relevant regulatory authorities to enable us to use the desired brand names for our product;
our ability to successfully negotiate pricing and reimbursement in key markets in the E.U. for Macrilen™ (macimorelin);
any evaluation of potential strategic alternatives to maximize potential future growth and shareholder value may not result in any such alternative being pursued, and even if pursued, may not result in the anticipated benefits;
our ability to protect our intellectual property; and
the potential of liability arising from shareholder lawsuits and general changes in economic conditions.

 

Additional factors that could cause actual results to differ materially include those risks identified in the section entitled “Risk Factors” as well as in Item 3. “Key Information – Risk Factors” contained Form 20-F and its other filings and submissions from time to time with the SEC, which are available on the Company’s website located at www.aeterna.com. Investors should also consult the Company’s quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties.

 

Many of these factors are beyond our control. We caution you not to place undue reliance on these forward-looking statements. All written and oral forward-looking statements attributable to the Company and/or Ceapro, or persons acting on their behalf, are qualified in their entirety by these cautionary statements. Moreover, unless required by law to update these statements, we will not necessarily update any of these statements after the date hereof, either to conform them to actual results or to changes in their expectation.

 

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RISK FACTORS

 

Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below in this prospectus and the information in Item 3. “Key Information – Risk Factors” contained in the Form 20-F and our other subsequent filings and submissions to the SEC from time to time on Form 20-F and Form 6-K, including our unaudited interim consolidated financial statements and corresponding management’s discussion and analysis, as well as our subsequent consolidated financial statements and corresponding management’s discussion and analysis filed with the Canadian securities regulatory authorities. For additional information, please see the sources described in “Where You Can Find More Information.”

 

These risks are not the only risks we face. Additional risks not presently known to us, or that we currently view as immaterial, may also impair our business, if any of the risks described in our SEC filings or any additional risks actually occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In that case, the value of our securities could decline substantially and you could lose all or part of your investment.

 

Risk Factors Relating to the Plan of Arrangement

 

The Plan of Arrangement is subject to satisfaction or waiver of several conditions, including receipt of the Stock Exchange Approvals, the Shareholder Approval and the Ceapro Securityholder Approval and there can be no certainty that all conditions precedent to the Plan of Arrangement will be satisfied or waived. Failure to complete the Plan of Arrangement could negatively impact the market price of the Common Shares.

 

Completion of the Plan of Arrangement is subject to satisfaction or waiver of several conditions, including, among other things, receipt of the Stock Exchange Approvals, the Shareholder Approval and the Ceapro Securityholder Approval and receipt of the Final Order and receipt (See the section entitled “The Plan of Arrangement – Principal Terms of the Arrangement Agreement” – “Conditions Precedent”). The completion of the Plan of Arrangement is conditional on, among other things, the receipt of the Regulatory Approvals. The completion of the Plan of Arrangement is also subject to the Consideration Shares and the Replacement Options to be issued pursuant to the Plan of Arrangement being exempt from the prospectus and registration requirements of applicable Securities Laws either by virtue of exemptive relief from the securities regulatory authorities of each of the provinces of Canada or by virtue of applicable exemptions under Securities Laws, including pursuant to the Section 3(a)(10) Exemption, and not being subject to resale restrictions, including under the U.S. Securities Act, subject to restrictions applicable to affiliates (as defined in Rule 405 of the U.S. Securities Act) of Aeterna Zentaris at the Effective Date or within 90 days of the Effective Date.

 

Certain of the conditions to completion of the Plan of Arrangement are outside of the control of Aeterna Zentaris. There can be no certainty, nor can Aeterna Zentaris provide any assurance, that all conditions precedent to the Plan of Arrangement will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Plan of Arrangement may not be completed. If, for any reason, the Plan of Arrangement is not completed or its completion is materially delayed and/or the Arrangement Agreement is terminated, the market price of the Common Shares may be materially adversely affected. In such events, Aeterna Zentaris’ business, financial condition or results of operations could also be subject to various material adverse consequences, including that Aeterna Zentaris would remain liable for costs relating to the Plan of Arrangement.

 

If the Plan of Arrangement is not completed and Aeterna Zentaris decides to seek another transaction, there can be no assurance that it will be able to find another merger on equivalent or more attractive terms than pursuant to the Plan of Arrangement. Furthermore, Ceapro may be entitled to a termination fee from Aeterna Zentaris upon the occurrence of certain events resulting in the termination of the Plan of Arrangement.

 

Restrictions on the Company’s business during the Interim Period.

 

The Arrangement Agreement imposes certain restrictions on the conduct of the Company’s business during the Interim Period, being the period between the execution of the Arrangement Agreement and the consummation of the Plan of Arrangement, which may have a negative impact on its performance. As the Plan of Arrangement is dependent upon the satisfaction of certain conditions, its completion is subject to uncertainty, and the Company’s customers and suppliers may delay or defer decisions concerning the Company which could have a negative impact on the Company’s business and operations, regardless of whether the Plan of Arrangement is ultimately completed.

 

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Completion of the Plan of Arrangement is uncertain. Aeterna Zentaris has dedicated significant resources to pursuing the Plan of Arrangement and is restricted from taking certain specified actions while the Plan of Arrangement is pending and failure to complete the Plan of Arrangement could negatively impact Aeterna Zentaris’ business.

 

Aeterna Zentaris and Ceapro are subject to certain non-solicitation provisions under the Arrangement Agreement with respect to an Acquisition Proposal (see section entitled “Additional Covenants”). The Arrangement Agreement also restricts Aeterna Zentaris from taking certain specified actions until the Plan of Arrangement is completed, without the consent of Ceapro. These restrictions may prevent Aeterna Zentaris from pursuing attractive business opportunities that may arise prior to the completion of the Plan of Arrangement. As completion of the Plan of Arrangement is dependent upon satisfaction of certain conditions, the completion of the Plan of Arrangement is uncertain. If the Plan of Arrangement is not completed for any reason, the announcement of the Plan of Arrangement, the dedication of Aeterna Zentaris’ resources to the completion thereof and the restrictions that were imposed on Aeterna Zentaris under the Arrangement Agreement may have an adverse effect on the current or future operations, financial condition and prospects of Aeterna Zentaris as a standalone entity.

 

The Arrangement Agreement may be terminated by Aeterna Zentaris or Ceapro in certain circumstances, which could result in significant costs and could negatively impact the market price of the Common Shares.

 

In addition to termination rights relating to the failure to satisfy the conditions of closing, each of Aeterna Zentaris and Ceapro has the right, in certain circumstances, to terminate the Arrangement Agreement and the Arrangement. Accordingly, there is no certainty, nor can Aeterna Zentaris provide any assurance, that the Arrangement Agreement will not be terminated by either Aeterna Zentaris or Ceapro before the implementation of the Plan of Arrangement. Failure to complete the Plan of Arrangement could negatively impact the trading price of the Common Shares or otherwise adversely affect Aeterna Zentaris’ business. See the section entitled “The Plan of Arrangement – Principal Terms of the Arrangement Agreement – Termination of the Arrangement Agreement”.

 

Because the market price of the Common Shares and the Ceapro Shares will fluctuate and the Exchange Ratio is fixed, there can be no certainty with respect to the market value of the Consideration Shares that Ceapro Shareholders will receive for their Ceapro Shares under the Plan of Arrangement.

 

The Exchange Ratio is fixed and will not increase or decrease due to fluctuations in the market price of Common Shares or Ceapro Shares. The market price of the Common Shares or Ceapro Shares could each fluctuate significantly prior to the Effective Date in response to various factors and events, including, without limitation, the differences between Aeterna Zentaris and Ceapro’s actual financial or operating results and those expected by investors and analysts, changes in analysts’ projections or recommendations, changes in general economic or market conditions and broad market fluctuations. The underlying cause of any such change in relative market price may constitute an Aeterna Zentaris Material Adverse Effect or Ceapro Material Adverse Effect, the occurrence of which in respect of a Party could entitle the other Party to terminate the Arrangement Agreement or otherwise entitle either Party to terminate the Arrangement Agreement. As a result of such fluctuations, historical market prices are not indicative of future market prices or the market value of the Consideration Shares that the Ceapro Shareholders may receive on the Effective Date. There can also be no assurance that the trading price of the Common Shares will not decline following the completion of the Plan of Arrangement. Accordingly, the market value represented by the Exchange Ratio will also vary.

 

The issuance of a significant number of Common Shares and a resulting “market overhang” could adversely affect the market price of the Common Shares following completion of the Plan of Arrangement.

 

On completion of the Plan of Arrangement, a significant number of additional Common Shares will be issued and available for trading in the public market. The increase in the number of Common Shares may lead to sales of such shares or the perception that such sales may occur (commonly referred to as “market overhang”), either of which may adversely affect the market for, and the market price of, the Common Shares.

 

17
 

 

The issuance of the Consideration Shares and the Common Shares upon the exercise of the Aeterna Zentaris New Warrants in connection with the Plan of Arrangement could result in the dilution of ownership and voting interests of current Shareholders.

 

As of the Record Date, Aeterna Zentaris has 4,855,876 Common Shares issued and outstanding. Immediately prior to the Consolidation and the Plan of Arrangement, it is expected that there will be 4,855,876 Common Shares issued and outstanding. It is anticipated that, upon completion of the Plan of Arrangement and assuming that the Consolidation is completed, there will be 12,245,969 Common Shares, 457,648 existing Common Share Purchase warrants, 53,400 Aeterna Zentaris Options, 196,920 Aeterna Zentaris DSUs, 2,534,424 Aeterna Zentaris New Warrants, and 271,672 Replacement Options issued and outstanding. This increase in the number of issued and outstanding Common Shares post-Arrangement may have a depressive effect on the price of the Common Shares. In addition, as a result of the issuance of such additional Common Shares, the voting power of the existing Shareholders will be substantially diluted. Aeterna Zentaris may, in its sole discretion in accordance with its constating documents and subject to applicable laws, including the policies of the TSX and Nasdaq, issue additional Common Shares or other securities (equity, debt or otherwise) from time to time, and the interests of the holders of Common Shares may be diluted thereby. Aeterna Zentaris’ constating documents permit the issuance of an unlimited number of Common Shares, and shareholders will have no pre-emptive rights in connection with such further issuances. In addition, when outstanding options are exercised or when Common Shares are issued on the vesting or settlement of outstanding share units, an investor will incur additional dilution. Accordingly, holders of Common Shares may suffer dilution.

 

The Raymond James Fairness Opinion is based on many factors.

 

The Company has obtained the Raymond James Fairness Opinion from Raymond James. The Raymond James Fairness Opinion is, of necessity, based on many factors, including an analysis of past results and certain assumptions governing future results. There can be no assurance that the Raymond James Fairness Opinion will prove, in retrospect, to have been accurate.

 

Aeterna Zentaris and Ceapro may be the targets of legal claims, securities class actions, derivative lawsuits and other claims. Any such claims may delay or prevent the Plan of Arrangement from being completed.

 

Aeterna Zentaris and Ceapro may be the target of securities class actions and derivative lawsuits which could result in substantial costs and may delay or prevent the Plan of Arrangement from being completed. Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into an agreement to acquire a public company or to be acquired. Third parties may also attempt to bring claims against Aeterna Zentaris and Ceapro seeking to restrain the Plan of Arrangement or seeking monetary compensation or other remedies. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the Plan of Arrangement, then that injunction may delay or prevent the Plan of Arrangement from being completed.

 

In addition, political and public attitudes towards the Plan of Arrangement could result in negative press coverage and other adverse public statements affecting Aeterna Zentaris and Ceapro. Adverse press coverage and other adverse statements could lead to investigations by regulators, legislators and law enforcement officials or in legal claims or otherwise negatively impact the ability of Aeterna Zentaris to take advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on Aeterna Zentaris’ business, financial condition and results of operations.

 

Aeterna Zentaris and Ceapro will incur substantial transaction fees and costs in connection with the proposed Arrangement. If the Plan of Arrangement is not completed, the costs may be significant and could have an adverse effect on Aeterna Zentaris.

 

Aeterna Zentaris and Ceapro have incurred and expect to incur additional material non-recurring expenses in connection with the Plan of Arrangement and completion of the transactions contemplated by the Arrangement Agreement, including costs relating to obtaining the Regulatory Approvals, the Shareholder Approval and the Ceapro Securityholder Approval. Additional unanticipated costs may be incurred by Aeterna Zentaris in the course of coordinating the businesses of Aeterna Zentaris and Ceapro after the completion of the Plan of Arrangement. If the Plan of Arrangement is not completed, Aeterna Zentaris will need to pay certain costs relating to the Plan of Arrangement incurred prior to the date the Plan of Arrangement was abandoned, such as legal, accounting, financial advisory and printing fees. Aeterna Zentaris is liable for its own costs incurred in connection with the Plan of Arrangement. Such costs may be significant and could have an adverse effect on Aeterna Zentaris’ future results of operations, cash flows and financial condition.

 

18
 

 

Prior to the Effective Date, the Plan of Arrangement may divert the attention of Aeterna Zentaris’ management, and any such diversion could have an adverse effect on the business of Aeterna Zentaris.

 

The pending Arrangement could cause the attention of Aeterna Zentaris’ management to be diverted from the day-to-day operations of Aeterna Zentaris. These disruptions could be exacerbated by a delay in the completion of the Plan of Arrangement and could result in lost opportunities or negative impacts on performance, which could have a material and adverse effect on the business, financial condition and results of operations or prospects of Aeterna Zentaris if the Plan of Arrangement is not completed, and on the business of Aeterna Zentaris following the Effective Date.

 

The Aeterna Zentaris Board considered financial projections prepared by Aeterna Zentaris management in connection with the Plan of Arrangement. Actual performance of Aeterna Zentaris and Ceapro may differ materially from these projections.

 

The Aeterna Zentaris Board considered, among other things, certain projections, prepared by Aeterna Zentaris management, with respect to each of Ceapro (the “Ceapro Projections”) and Aeterna Zentaris (the “Aeterna Zentaris Projections”, together with the Ceapro Projections, the “Projections”). All such projections are based on assumptions and information available at the time the Projections were prepared. Aeterna Zentaris does not know whether the assumptions made will be realized. Such information can be adversely affected by known or unknown risks and uncertainties, many of which are beyond Aeterna Zentaris and Ceapro’s control. Further, financial forecasts of this type are based on estimates and assumptions that are inherently subject to risks and other factors such as counterparty performance, technical estimates, industry performance, legal and regulatory developments, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of Aeterna Zentaris and Ceapro, including the factors described in this “Risk Factors” section and under the section entitled “Forward-Looking Statements”, which factors and changes may impact such forecasts or the underlying assumptions. As a result of these contingencies, there can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than projected. In view of these uncertainties, the references to the Projections in this prospectus should not be regarded as an indication that Aeterna Zentaris, the Aeterna Zentaris Board, or any of its advisors or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results.

 

The Projections were prepared by Aeterna Zentaris management for internal use and to, among other things, assist Aeterna Zentaris in evaluating the Plan of Arrangement. The Projections were not prepared with a view toward public disclosure or toward compliance with IFRS, published guidelines of applicable securities regulatory authorities or the guidelines established by the Chartered Professional Accountants for preparation and presentation of prospective financial information. Neither Aeterna Zentaris’ independent registered public accounting firms, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the Projections.

 

There could be unknown or undisclosed risks or liabilities of Ceapro for which Aeterna Zentaris is not permitted to terminate the Arrangement Agreement.

 

While Aeterna Zentaris conducted due diligence with respect to Ceapro prior to entering into the Arrangement Agreement, there are risks inherent in any transaction. Specifically, there could be unknown or undisclosed risks or liabilities of Ceapro for which Aeterna Zentaris is not permitted to terminate the Arrangement Agreement. Any such unknown or undisclosed risks or liabilities could materially and adversely affect Aeterna Zentaris’ financial performance and results of operations. Aeterna Zentaris could encounter additional transaction and enforcement-related costs and may fail to realize any or all of the potential benefits from the Arrangement Agreement. Any of the foregoing risks and uncertainties could have a material adverse effect on Aeterna Zentaris’ business, financial condition and results of operations.

 

19
 

 

Although Aeterna Zentaris has conducted due diligence on Ceapro, it has not verified the reliability of all of the information regarding Ceapro included in, or which may have been omitted from, this prospectus.

 

Unless otherwise indicated, all historical information regarding Ceapro contained in this prospectus, including all Ceapro financial information and all pro forma financial information of Ceapro reflecting the pro forma effects of the acquisition of Ceapro by Aeterna Zentaris, has been derived from Ceapro’s publicly disclosed information or provided by Ceapro. Although Aeterna Zentaris conducted due diligence on Ceapro to its satisfaction in connection with the Plan of Arrangement and has no reason to doubt the accuracy or completeness of such information, any inaccuracy or material omission in Ceapro’s publicly disclosed information, including the information about or relating to Ceapro contained in this prospectus, could result in unanticipated liabilities or expenses, increase the cost of integrating the companies or adversely affect Aeterna Zentaris’ operational and development plans and Aeterna Zentaris’ business, financial condition and results of operations.

 

Ceapro may be obligated to make substantial cash payments to Dissenting Ceapro Shareholders.

 

Registered holders of Ceapro Shares have the right to exercise Dissent Rights and demand payment equal to the fair value of their Ceapro Shares in cash. If Dissent Rights are properly exercised in respect of a significant number of Ceapro Shares, Ceapro will be obliged under the Arrangement Agreement to make a substantial cash payment to such Ceapro Shareholders, which could have an adverse effect post-closing on Aeterna Zentaris’ expected financial condition and cash resources. Further, Aeterna Zentaris’ obligation to complete the Plan of Arrangement is conditional upon Ceapro Shareholders holding no more than 10% of the outstanding Ceapro Shares having exercised Dissent Rights. Accordingly, the Plan of Arrangement may not be completed if Ceapro Shareholders exercise Dissent Rights in respect of more than 10% of the outstanding Ceapro Shares.

 

Uncertainty surrounding the Plan of Arrangement could adversely affect Aeterna Zentaris’ retention of personnel and could negatively impact future business and operations.

 

The Plan of Arrangement is dependent upon the satisfaction of various conditions, and as a result its completion is subject to uncertainty. In response to this uncertainty, current and prospective employees of Aeterna Zentaris may experience uncertainty about their future roles until such time as Aeterna Zentaris’ plans with respect to such employees are determined and announced. This may adversely affect Aeterna Zentaris’ ability to attract or retain key employees in the period until the Plan of Arrangement is completed or thereafter.

 

Risk Factors Relating to the Consolidation

 

Reducing the number of issued and outstanding Common Shares through the Consolidation is intended, absent other factors, to increase the per share market price of the Common Shares. However, the market price of the Common Shares will also be affected by the Company’s financial and operational results, its financial position, including its liquidity and capital resources, the development of its reserves and resources, industry conditions, the market’s perception of the Company’s business and other factors, which are unrelated to the number of Common Shares outstanding.

 

Having regard to these other factors, there can be no assurance that the market price of the Common Shares will increase following the implementation of the Consolidation to the extent sufficient to ensure compliance with the Bid Price Rule and allow for a listing of the Common Shares on the Nasdaq following the completion of the Plan of Arrangement, or that the market price of the Common Shares will not decrease in the future and result in noncompliance with the continuous listing Bid Price Rule. There can also be no assurance that the implementation of the Consolidation will, in and of itself, guarantee the continued listing of the Common Shares on the Nasdaq or that the Common Shares will not be delisted from the Nasdaq because the Company fails to meet other Nasdaq listing requirements.

 

The market price of the Common Shares immediately following the implementation of the Consolidation is expected to be approximately equal to the market price of the Common Shares prior to the implementation of the Consolidation multiplied by the Consolidation Ratio but there is no assurance that the anticipated market price immediately following the implementation of the Consolidation will be realized or, if realized, will be sustained or will increase. There is a risk that the total market capitalization of the Common Shares (the market price of the Common Shares multiplied by the number of Common Shares outstanding) after the implementation of the Consolidation may be lower than the total market capitalization of the Common Shares prior to the implementation of the Consolidation.

 

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Although the Company believes that establishing a higher market price for the Common Shares could increase investment interest for the Common Shares in equity capital markets by potentially broadening the pool of investors that may consider investing in the Company, including investors whose internal investment policies prohibit or discourage them from purchasing stocks trading below a certain minimum price, there is no assurance that implementing the Consolidation will achieve this result.

 

If the Consolidation is implemented and the market price of the Common Shares (adjusted to reflect the Consolidation Ratio) declines, the percentage decline as an absolute number and as a percentage of the Company’s overall market capitalization may be greater than would have occurred if the Consolidation had not been implemented. Both the total market capitalization of a company and the adjusted market price of such company’s shares following a consolidation or reverse split may be lower than they were before the consolidation or reverse split took effect. The reduced number of Common Shares that would be outstanding after the Consolidation is implemented could adversely affect the liquidity of the Common Shares.

 

The Consolidation may result in some Shareholders owning “odd lots” of fewer than 100 Common Shares on a post-Common Consolidation basis. Odd lot Common Shares may be more difficult to sell, or may attract greater transaction costs per Share to sell, and brokerage commissions and other costs of transactions in odd lots may be higher than the costs of transactions in “round lots” of even multiples of 100 Common Shares.

 

Risk Factors Relating to the Combined Company

 

In addition to the risk factors set forth under this “Risk Factors” section, those in Item 3. “Key Information – Risk Factors in the Form 20-F incorporated by reference into this prospectus and included under the heading entitled “Information Concerning Ceapro – Risk Factors, the following risk factors relate to Aeterna Zentaris (including Ceapro as its wholly-owned subsidiary) following the completion of the Plan of Arrangement:

 

Significant demands will be placed on the Combined Company and Aeterna Zentaris and Ceapro cannot provide any assurance that their systems, procedures and controls will be adequate to support the expansion of operations and associated increased costs and complexity following and resulting from the Plan of Arrangement.

 

As a result of the pursuit and completion of the Plan of Arrangement, significant demands will be placed on the managerial, operational and financial personnel and systems of Aeterna Zentaris and Ceapro. Aeterna Zentaris cannot provide any assurance that their systems, procedures and controls will be adequate to support the expansion of operations and associated increased costs and complexity following and resulting from the Plan of Arrangement. The future operating results of the Combined Company will be affected by the ability of its officers and key employees to manage changing business conditions, to integrate the acquisition of Ceapro, to implement a new business strategy and to improve its operational and financial controls and reporting systems.

 

The failure to achieve the desired synergies and benefits of the Plan of Arrangement could have a material adverse effect on the market price of the Common Shares following completion of the Plan of Arrangement.

 

The Plan of Arrangement has been agreed to with the expectation that its completion will result in an increase in sustained profitability, cost savings and enhanced growth opportunities for the Combined Company. These anticipated benefits will depend in part on whether Aeterna Zentaris and Ceapro’s operations can be integrated in an efficient and effective manner. The extent to which synergies are realized and the timing of such cannot be assured.

 

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Aeterna Zentaris and Ceapro may be unable to successfully integrate their businesses and realize the anticipated benefits of the Plan of Arrangement. The failure to successfully integrate the businesses of Aeterna Zentaris and Ceapro could have a material adverse effect on the market price of the Common Shares following completion of the Plan of Arrangement.

 

The integration requires the dedication of substantial effort, time and resources on the part of management which may divert management’s focus and resources from other strategic opportunities and from operational matters during this process. In addition, the integration process could result in disruption of existing relationships with suppliers, employees, customers and other constituencies of each Party. There can be no assurance that management will be able to integrate the operations of each of the businesses successfully or achieve any of the synergies or other benefits that are anticipated as a result of the Plan of Arrangement. Most operational and strategic decisions and certain staffing decisions with respect to integration have not yet been made. These decisions and the integration of the two parties will present challenges to management, including the integration of systems and personnel of the two parties which may be geographically separated, unanticipated liabilities and unanticipated costs. It is possible that the integration process could result in the loss of key employees, the disruption of the respective ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of management to maintain relationships with operators or employees or to achieve the anticipated benefits of the Plan of Arrangement. The performance of Aeterna Zentaris’ operations after completion of the Plan of Arrangement could be adversely affected if Aeterna Zentaris cannot retain key employees to assist in the integration and operation of Aeterna Zentaris and Ceapro.

 

The consummation of the Plan of Arrangement may pose special risks, including one-time write-offs, restructuring charges and unanticipated costs. Although Ceapro, Aeterna Zentaris and their respective advisors have conducted due diligence on the various operations, there can be no guarantee that Aeterna Zentaris will be aware of any and all liabilities of Ceapro or the Plan of Arrangement. As a result of these factors, it is possible that certain benefits expected from the Plan of Arrangement may not be realized. Any inability of management to successfully integrate the operations could have an adverse effect on the business, financial condition and results of operations of Aeterna Zentaris.

 

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and may not be indicative of the results of operations or financial condition of Aeterna Zentaris’ financial condition or results of operations following completion of the Plan of Arrangement and the Consolidation.

 

The unaudited pro forma consolidated financial statements included in this prospectus are presented for illustrative purposes only to show the effect of the Plan of Arrangement and the Consolidation, and should not be considered to be an indication of the financial condition or results of operations of Aeterna Zentaris following completion of the foregoing. For example, the pro forma consolidated financial statements have been prepared using the consolidated historical financial statements of Aeterna Zentaris and Ceapro and do not represent a financial forecast or projection. In addition, the pro forma consolidated financial statements included in this prospectus is based in part on certain assumptions regarding the Plan of Arrangement and the Consolidation. These assumptions may not prove to be accurate, and other factors may affect Aeterna Zentaris’ results of operations or financial condition following completion of the foregoing. Accordingly, the historical and pro forma consolidated financial statements included in this prospectus do not necessarily represent Aeterna Zentaris’ results of operations and financial condition had Aeterna Zentaris and Ceapro as a combined entity during the periods presented, or of Aeterna Zentaris’ results of operations and financial condition following the Plan of Arrangement.

 

In preparing the pro forma consolidated financial statements contained in this prospectus, Aeterna Zentaris has given effect to, among other items, the Plan of Arrangement, including the issuance of the Consideration Shares and the Aeterna Zentaris New Warrants, and the Consolidation. The unaudited pro forma consolidated financial statements do not reflect all of the costs that are expected to be incurred by Aeterna Zentaris in connection with the Plan of Arrangement and the Consolidation. For example, the impact of any incremental costs incurred in integrating Aeterna Zentaris and Ceapro is not reflected in the pro forma consolidated financial statements. See also the notes to the unaudited pro forma consolidated financial statements included in section entitled “Unaudited Pro Forma Combined Consolidated Financial Information” included in this prospectus.

 

22
 

 

Failure by Aeterna Zentaris and/or Ceapro to comply with applicable Laws prior to the Plan of Arrangement could subject the Combined Company to penalties and other adverse consequences following completion of the Plan of Arrangement.

 

Aeterna Zentaris is subject to the United States Foreign Corrupt Practices Act and Aeterna Zentaris and Ceapro are subject to the Corruption of Foreign Public Officials Act (Canada). The foregoing Laws prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. In addition, such Laws require the maintenance of records relating to transactions and an adequate system of internal controls over financial reporting. There can be no assurance that either Party’s internal control policies and procedures, compliance mechanisms or monitoring programs will protect it from recklessness, fraudulent behavior, dishonesty or other inappropriate acts or adequately prevent or detect possible violations under applicable anti-bribery and anti-corruption legislation. A failure by Aeterna Zentaris or Ceapro to comply with anti-bribery and anti-corruption legislation could result in severe criminal or civil sanctions, and may subject Aeterna Zentaris to other liabilities, including fines, prosecution, potential debarment from public procurement and reputational damage, all of which could have a material adverse effect on the business, consolidated results of operations and consolidated financial condition of the Combined Company. Investigations by governmental authorities could have a material adverse effect on the business, consolidated results of operations and consolidated financial condition of the Combined Company.

 

Aeterna Zentaris and Ceapro are also subject to a wide variety of Laws relating to the environment, health and safety, intellectual property, taxes, employment, labor standards, money laundering, terrorist financing and other matters in the jurisdictions in which they operate. A failure by either of Aeterna Zentaris or Ceapro to comply with any such legislation prior to the Plan of Arrangement could result in severe criminal or civil sanctions, and may subject Aeterna Zentaris to other liabilities, including fines, prosecution and reputational damage, all of which could have a material adverse effect on the business, consolidated results of operations and consolidated financial condition of the Combined Company. The compliance mechanisms and monitoring programs adopted and implemented by either of Aeterna Zentaris or Ceapro prior to the Plan of Arrangement may not adequately prevent or detect possible violations of such applicable Laws. Investigations by governmental authorities could also have a material adverse effect on the business, consolidated results of operations and consolidated financial condition of the Combined Company.

 

Following the Plan of Arrangement, the trading price of the Common Shares cannot be guaranteed, may be volatile and could be less than, on an adjusted basis, the current trading prices of Aeterna Zentaris and Ceapro due to various market-related and other factors.

 

Securities markets have a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. Securities of companies in biotechnology, biopharmaceutical and related industries have experienced substantial volatility in the past, often based on factors unrelated to the financial performance or prospects of the companies involved. There can be no assurance that continuing fluctuations in price will not occur. The market price per Common Share is also likely to be affected by changes in Aeterna Zentaris’ financial condition or results of operations. Other factors unrelated to the performance of Aeterna Zentaris that may have an effect on the price of Common Shares include the following: (a) current events affecting the economic situation in Canada, United States and internationally; (b) changes in the market price of the commodities that Aeterna Zentaris and Ceapro sell and purchase; (c) trends in the biotechnology and biopharmaceutical industries; (d) regulatory and/or government actions, rulings or policies; (e) changes in financial estimates and recommendations by securities analysts or rating agencies; (f) acquisitions and financings; (g) the economics of current and future projects and operations of Aeterna Zentaris and Ceapro; (h) quarterly variations in operating results; (i) the operating and share price performance of other companies, including those that investors may deem comparable; (j) the issuance of additional equity securities by Aeterna Zentaris or Ceapro, as applicable, or the perception that such issuance may occur; and (k) purchases or sales of blocks of Common Shares or Ceapro Shares, as applicable.

 

There are no assurances with respect to the resale of Common Shares, including the Consideration Shares and Common Shares issuable upon the exercise of the Aeterna Zentaris New Warrants issued under the Plan of Arrangement.

 

There can be no assurance that the publicly-traded market price of the Common Shares will be high enough to create a positive return for the existing investors. Further, there can be no assurance that the Common Shares will be sufficiently liquid so as to permit investors to sell their position in Aeterna Zentaris without adversely affecting the stock price. In such event, the probability of resale of the Common Shares would be diminished.

 

23
 

 

In the event that Aeterna Zentaris fails to satisfy any of the listing requirements of Nasdaq, including the Bid Price Rule, Nasdaq may reject Aeterna Zentaris’ application to list on Nasdaq

 

The Common Shares are currently listed on both the Nasdaq and the TSX under the symbol “AEZS”, however, under applicable Nasdaq rules and regulations, the Plan of Arrangement will be considered to be change of control requiring a new listing and, in such a circumstance, Aeterna Zentaris will be required to make a new application to list the Common Shares on Nasdaq following the completion of the Plan of Arrangement. To meet listing requirements on the Nasdaq, the Nasdaq requires, among other things, that listed securities have a minimum bid price of US$4.00 per share or a minimum closing price of US$2.00 to US$3.00 per share, with the specific requisite price based on the satisfaction of certain financial and liquidity requirements set forth in Nasdaq Listing Rules 5505(a) and (b) in accordance with the Bid Price Rule.

 

In addition to the Bid Price Rule, if the Plan of Arrangement is treated as a new listing, Nasdaq requires Aeterna Zentaris to have, depending on the applicable listing standard selected by Aeterna Zentaris: (i) stockholders’ equity of at least US$5 million, a market value of unrestricted publicly held shares of US$15 million, an operating history of 2 years, at least 1 million unrestricted publicly held shares outstanding, at least 300 unrestricted round lot shareholders, and at least 3 market makers; (ii) stockholders’ equity of at least US$4 million, a market value of unrestricted publicly held shares of US$15 million, a market value of listed securities of at least US$50 million, at least 1 million unrestricted publicly held shares outstanding, at least 300 unrestricted round lot shareholders, and at least 3 market makers; or (iii) stockholders’ equity of at least US$4 million, a market value of unrestricted publicly held shares of US$5 million, net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years) of at least US$750,000, at least 1 million unrestricted publicly held shares outstanding, at least 300 unrestricted round lot shareholders, and at least 3 market makers, in each case in addition to the Nasdaq’s corporate governance requirements.

 

It is possible that we may be a passive foreign investment company.

 

Adverse U.S. federal income tax rules apply to U.S. Holders who directly or indirectly hold stock of a PFIC. We would be classified as a PFIC for U.S. federal income tax purposes for a taxable year if (i) at least 75% of our gross income is “passive income” or (ii) at least 50% quarterly of the average value of our assets, including goodwill (based on annual quarterly average), is attributable to assets which produce passive income or are held for the production of passive income.

 

The determination of whether we are, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to various interpretations. Although the matter is not free from doubt, we believe that we were not a PFIC during our 2023 taxable year and it does not expect to be a PFIC for our 2024 taxable year. Because PFIC status is based on our income, assets and activities for the entire taxable year, and our market capitalization, it is not possible to determine whether we will be characterized as a PFIC for the 2024 taxable year until after the close of the taxable year. The tests for determining PFIC status are subject to a number of uncertainties. These tests are applied annually, and it is difficult to accurately predict future income, assets and activities relevant to this determination. In addition, because the market price of our Common Shares is likely to fluctuate, the market price may affect the determination of whether we will be considered a PFIC. Accordingly, there can be no assurance that we have not been, or will not be, a PFIC for any taxable year (including our 2024 taxable year).

 

If we were or are classified as a PFIC for U.S. federal income tax purposes, U.S. investors that hold Common Shares may be subject to potentially significant adverse U.S. federal income tax consequences.

 

If we were to constitute a PFIC for any year during a U.S. Holder’s holding period for Common Shares, then certain potentially adverse rules will affect the U.S. federal income tax consequences to such U.S. Holder, including resulting from the ownership and disposition of Common Shares. For a more detailed discussion of the PFIC rules, including the consequences and availability of certain elections, see “Material U.S. Federal Income Tax Considerations for U.S. Holders – Passive Foreign Investment Company Considerations”.

 

24
 

 

Investments in biopharmaceutical companies are generally considered to be speculative in nature.

 

The prospects for companies operating in the biopharmaceutical industry are uncertain, given the very nature of the industry, in which companies often experience lengthy development time, extensive capital requirements, rapid technological developments and a high degree of competition based primarily on scientific and technological factors. These factors include the availability to obtain patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain government approval for testing, manufacturing and marketing. Accordingly, investments in biopharmaceutical companies should be considered to be speculative assets.

 

The Combined Company may not achieve our projected development goals in the time-frames we announce and expect.

 

The Combined Company may set goals and make public statements regarding the timing of the accomplishment of objectives material to our success, such as the commencement, enrollment and anticipated completion of clinical trials, anticipated regulatory submission and approval dates and time of product launch. The actual timing of these events can vary dramatically due to factors such as delays or failures in any clinical trials, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements sufficient to commercialize any of our products or product candidates. There can be no assurance that the Combined Company will make regulatory submissions or receive regulatory approvals as planned. If the Combined Company fails to achieve one or more of its planned milestones, the share price of the Common Shares may decline.

 

Competition in our targeted markets is intense, and development by other companies could render any of our current or future products, non-competitive.

 

The biopharmaceutical field is highly competitive. New products developed by other companies in the industry could render any of the Combined Company’s future products uncompetitive or significantly less competitive. Competitors are developing and testing products and technologies that would compete with the Combined Company’s products. Some of these competitive products may be more effective or have an entirely different approach or means of accomplishing the desired effect. The Combined Company expects competition from pharmaceutical and biopharmaceutical companies and academic research institutions to continue to increase over time. Many competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than the Combined Company.

 

The Combined Company may infringe the intellectual property rights of others.

 

The Combined Company’s commercial success depends significantly on its ability to operate without infringing the patents and other intellectual property rights of third parties. There could be issued patents of which the Combined Company is not aware that the Combined Company’s products or methods may be found to infringe, or patents of which the Combined Company may become aware and believes that it does not infringe, but which it may ultimately be found to infringe. Moreover, patent applications and their underlying discoveries are in some cases maintained in secrecy until patents are issued. Because patents can take many years to issue, there may be currently pending applications of which the Combined Company is unaware that may later result in issued patents that the Combined Company’s products or technologies are found to infringe. Moreover, there may be published pending applications that do not currently include a claim covering our products or technologies, but, which nonetheless, provide support for a later drafted claim that, if issued, our products or technologies could be found to infringe.

 

If the Combined Company infringes or is alleged to infringe intellectual property rights of third parties, it will adversely affect its business. Third parties may own or control these patents or patent applications in the U.S. and abroad. These third parties could bring claims against the Combined Company or its collaborators that would cause us to incur substantial expenses and, if successful against the Combined Company, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against the Combined Company or its collaborators, the Combined Company could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

 

25
 

 

The biopharmaceutical industry has produced a proliferation of patents, and it is not always clear to industry participants which patents cover various types of products. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. In the event of infringement or violation of another party’s patent or other intellectual property rights, the Combined Company may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost. Any inability to secure licenses or alternative technology could result in delays in the introduction of the Combined Company’s products or lead to prohibition of the manufacture or sale of products by the Combined Company or its partners and collaborators.

 

Patent litigation is costly and time consuming and may subject us to liabilities.

 

If the Combined Company becomes involved in any patent litigation, interference, opposition, re-examination or other administrative proceedings, we will likely incur substantial expenses in connection therewith, and the efforts of our technical and management personnel will be significantly diverted. In addition, an adverse determination in litigation could subject the Combined Company to significant liabilities.

 

In carrying out operations, the Combined Company is expected to be dependent on a stable and consistent supply of ingredients and raw materials.

 

There can be no assurance that the Combined Company, its contract manufacturers or its licensees, will be able, in the future, to continue to purchase products from our current suppliers or any other supplier on terms that are favorable or similar to current terms or at all. An interruption in the availability of certain raw materials or ingredients, or significant increases in the prices we pay for them, could have a material adverse effect on the Combined Company’s business, financial condition, liquidity and operating results.

 

We are subject to intense competition for our skilled personnel, and the loss of key personnel or the inability to attract additional personnel could impair our ability to conduct our operations.

 

The Combined Company will be highly dependent on management and clinical, regulatory and scientific staff, the loss of whose services might adversely impact our ability to achieve the Combined Company’s objectives. Recruiting and retaining qualified management and clinical, scientific and regulatory personnel is critical to the Combined Company’s success. The competition for qualified personnel in the biopharmaceutical field is intense, and if the Combined Company is not able to retain qualified personnel and/or maintain positive relationships with outside consultants, the Combined Company may not be able to achieve its strategic and operational objectives.

 

The Combined Company may be subject to litigation in the future.

 

The Combined Company may, from time to time, be a party to litigation in the normal course of business. Monitoring and defending against legal actions, whether meritorious, is time-consuming for our management and detracts from the Combined Company’s ability to fully focus our internal resources on our business activities. In addition, legal fees and costs incurred in connection with such activities may be significant and the Combined Company could, in the future, be subject to judgments or enter into settlements of claims for significant monetary damages. A decision adverse to the Combined Company’s interests could result in the payment of substantial damages and could have a material adverse effect on the Combined Company’s cash flow, results of operations and financial position.

 

With respect to any litigation, the Combined Company’s insurance may not reimburse it, or may not be sufficient to reimburse, for the expenses or losses it may suffer in contesting and concluding such lawsuit. Substantial litigation costs, including the substantial self-insured retention that the Combined Company is required to satisfy before any insurance applies to a claim, unreimbursed legal fees or an adverse result in any litigation may adversely impact the Combined Company’s business, operating results or financial condition.

 

26
 

 

The Combined Company will be subject to the risk of product liability claims, for which it may not have or may not be able to obtain adequate insurance coverage.

 

The sale and use of the Combined Company’s products will involve the risk of product liability claims and associated adverse publicity. Product liability claims might be made against the Combined Company directly by patients, healthcare providers or pharmaceutical companies, or others selling, buying or using our products. The Combined Company plans to maintain insurance covering its liability for preclinical and clinical studies as well as products liability insurance. However, the Combined Company may not have or be able to obtain or maintain sufficient and affordable insurance coverage, including coverage for potentially very significant legal expenses, and without sufficient coverage any claim brought against the Combined Company could have a materially adverse effect on our business, financial condition or results of operations.

 

It may be difficult for U.S. investors to obtain and enforce judgments against the Combined Company because of its Canadian incorporation and German presence.

 

The Combined Company will be a company existing under the laws of Canada. A number of the directors and officers of the Combined Company are residents of Canada or otherwise reside outside the U.S., and all or a substantial portion of their assets, and a substantial portion of our assets, are located outside the U.S. Consequently, although the Combined Company will have appointed an agent for service of process in the U.S., it may be difficult for investors in the U.S. to bring an action against such directors or officers or to enforce against those persons or us a judgment obtained in a U.S. court predicated upon the civil liability provisions of federal securities laws or other laws of the U.S. investors should not assume that foreign courts (i) would enforce judgments of U.S. courts obtained in actions against us or such directors, officers or experts predicated upon the civil liability provisions of the U.S. federal securities laws or the securities or “blue sky” laws of any state within the U.S. or (ii) would enforce, in original actions, liabilities against us or such directors, officers or experts predicated upon the U.S. federal securities laws or any such state securities or “blue sky” laws.

 

The Combined Company is subject to various internal control reporting requirements under applicable Canadian securities laws and the Sarbanes-Oxley Act in the U.S. The Combined Company can provide no assurance that it will, at all times in the future, be able to report that our internal controls over financial reporting are effective.

 

As a public company, the Combined Company is required to comply with Section 404 of the U.S. Sarbanes-Oxley Act of 2002 and National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian securities administrators. The Combined Company cannot be certain as to the time of completion of its internal control evaluation, testing and remediation actions or of their impact on the Combined Company’s operations. Upon completion of this process, the Combined Company may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting Oversight Board (U.S.) rules and regulations. As a public company, the Combined Company is required to report, among other things, control deficiencies that constitute material weaknesses or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. If the Combined Company fails to comply with the requirements of Section 404 of the U.S. Sarbanes-Oxley Act of 2002 or similar Canadian requirements, or if the Combined Company reports a material weakness, the Combined Company might be subject to regulatory sanction and investors may lose confidence in our consolidated financial statements, which may be inaccurate if the Combined Company fails to remedy such material weakness.

 

The Combined Company may have material weaknesses in its internal controls over financial reporting which could have a material adverse effect on the price of the Common Shares.

 

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in reports filed with securities regulatory agencies is recorded, processed, summarized and reported on a timely basis and is accumulated and communicated to a company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Aeterna Zentaris has invested resources to document and analyze its system of disclosure controls and its internal control over financial reporting which the Combined Company is expected to continue to implement. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation.

 

27
 

 

The Combined Company may incur losses associated with foreign currency fluctuations.

 

The Combined Company’s operations are, in many instances, conducted in currencies other than our functional currency or the functional currencies of our subsidiaries. Fluctuations in the value of currencies could cause the Combined Company to incur currency exchange losses. The Combined Company cannot assert with any assurance that it will not suffer losses as a result of unfavorable fluctuations in the exchange rates between the U.S. dollar, the euro, the Canadian dollar and other currencies.

 

Legislative actions, new accounting pronouncements and higher insurance costs may adversely impact our future financial position or results of operations.

 

Changes in financial accounting standards or implementation of accounting standards may cause adverse, unexpected revenue or expense fluctuations and affect the Combined Company’s financial position or results of operations. New pronouncements and varying interpretations of pronouncements are expected to occur in the future, and the Combined Company may make or be required to make changes in its accounting policies in the future. Compliance with changing regulations of corporate governance and public disclosure, notably with respect to internal controls over financial reporting, may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for companies such as ours, and insurance costs are increasing as a result of this uncertainty.

 

Data security breaches may disrupt our operations and adversely affect the Combined Company operating results.

 

The Combined Company’s network security and data recovery measures and those of third parties with which it may contract with, may not be adequate to protect against computer viruses, cyber-attacks, breaches, and similar disruptions from unauthorized tampering with our computer systems. The misappropriation, theft, sabotage or any other type of security breach with respect to any of the Combined Company’s proprietary and confidential information that is electronically stored, including research or clinical data, could cause interruptions to the Combined Company’s operations, could result in a material disruption of the Combined Company’s clinical activities and business operations and could expose the Combined Company to third-party legal claims. Furthermore, the Combined Company could be required to make substantial expenditures of resources to remedy the cause of cyber-attacks or break-ins. This disruption could have a material adverse impact on the Combined Company’s business, operating results and financial condition. Additionally, any break-in or trespass of the Combined Company’s facilities that results in the misappropriation, theft, sabotage or any other type of security breach with respect to the Combined Company’s proprietary and confidential information, including research or clinical data, or that results in damage to the Combined Company’s research and development equipment and assets could have a material adverse impact on the Combined Company’s business, operating results and financial condition.

 

The Combined Company’s business processes personal information, both in connection with clinical activities and employees. The use of this information is critical to the Combined Company’s operations and innovation, including the development of the Combined Company’s products, as well as management of employees. New and evolving regulations, such as the European Union General Data Protection Regulation, could bring increased scrutiny on the Combined Company’s data management processes in the future. Any cyber-attacks or other failure to protect critical and sensitive systems and information could damage the Combined Company’s reputation, prompt litigation or lead to regulatory sanctions, all of which could materially affect the Combined Company’s financial condition and results of operation.

 

Risk Factors Relating to our Common Shares

 

The Common Share price is volatile and will likely continue to be volatile after the completion of the Plan of Arrangement, which may result from factors outside of the Combined Company’s control.

 

Between January 1, 2023 and December 31, 2023, the closing price of the Common Shares ranged from US$1.42 to US$3.89 per share on the Nasdaq and from C$1.91 to C$5.30 per share on the TSX. Between December 14, 2023, the date of the Arrangement Agreement, and February 13, 2024, the closing price of the Common Shares ranged from US$1.69 to US$2.33 per share on the Nasdaq and from C$2.28 to C$3.06 per share on the TSX.

 

28
 

 

The Common Share price may be affected by developments directly affecting the Combined Company’s business and by developments out of the control of the Combined Company or unrelated to the Combined Company. The stock market generally, and the biopharmaceutical sector in particular, are vulnerable to abrupt changes in investor sentiment. Prices of shares and trading volume of companies in the biopharmaceutical industry can swing dramatically in ways unrelated to, or that bear a disproportionate relationship to, operating performance. The Common Share price and trading volume may fluctuate based on a number of factors including, but not limited to, the following:

 

developments regarding current or future third-party suppliers and licensee(s);

 

delays in anticipated clinical trial development or commercialization timelines;

 

announcements by the Combined Company regarding technological, regulatory or other matters;

 

arrivals or departures of key personnel;

 

governmental or regulatory action affecting the Combined Company’s product candidates and our competitors’ products in the U.S., Canada and other countries;

 

developments or disputes concerning patent or proprietary rights;

 

actual or anticipated fluctuations in our revenues or expenses;

 

general market conditions and fluctuations for the emerging growth and biopharmaceutical market sectors; and

 

economic conditions in the U.S. or abroad.

 

The Combined Company’s listing on both the Nasdaq and the TSX may increase price volatility due to various factors, including different ability to buy or sell the Common Shares, different market conditions in different capital markets, and different trading volumes. In addition, low trading volume may increase the price volatility of the Common Shares. A thin trading market could cause the share price of the Common Shares to fluctuate significantly more than the stock market as a whole.

 

In the event the Combined Company loses its foreign private issuer status as of June 30 of a given financial year, it would be required to comply with the U.S. domestic reporting regime under the Exchange Act, which could cause the Combined Company to incur additional legal, accounting and other expenses.

 

In order to maintain status as a foreign private issuer, either (a) a majority of the Common Shares must not be either directly or indirectly owned of record by residents of the U.S. or (b) (i) a majority of the executive officers and directors must not be U.S. citizens or residents, (ii) more than 50 percent of the Combined Company’s assets cannot be located in the U.S. and (iii) the Combined Company’s business must be administered principally outside the U.S.

 

There can be no assurance that the Combined Company will remain a foreign private issuer either in 2024 or in future financial years.

 

If the Combined Company loses its foreign private issuer status as of June 30 of any given financial year, it would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. The Combined Company may also be required to make changes in its corporate governance practices in accordance with various SEC rules and the Nasdaq listing standards. The regulatory and compliance costs to us of complying with the reporting requirements applicable to a U.S. domestic issuer under U.S. securities laws may be higher than the cost incurred as a foreign private issuer. As a result, the Combined Company would expect that a potential loss of foreign private issuer status at some future point in time could increase legal, financial reporting and accounting compliance costs, and it is difficult at this time to estimate by how much its legal, financial reporting and accounting compliance costs may increase in such eventuality.

 

29
 

 

USE OF PROCEEDS

 

We will not receive any proceeds from the issuance of the Aeterna Zentaris New Warrants to Aeterna Shareholders and Aeterna Warrant Holders. Because all Aeterna Zentaris New Warrants must be exercised on a cashless basis, we will also not receive any proceeds from the exercise of any Aeterna Zentaris New Warrants.

 

DIVIDEND POLICY

 

We have never declared nor paid dividends on our securities. We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends on our securities is subject to the discretion of our Board of Directors and will depend upon various factors, including, without limitation, our results of operations and financial condition.

 

CAPITALIZATION

 

The following table presents the number of our issued and outstanding Common Shares and our consolidated cash and cash equivalents and capitalization as at September 30, 2023:

 

  on an actual basis; and
     
  on a pro-forma basis adjusted to reflect the offering and the acquisition.

 

The information below has been derived from and should be read in conjunction with, and is qualified in its entirety by, our unaudited consolidated financial statements as at September 30, 2023 and the Management’s Discussion and Analysis thereon incorporated by reference into this prospectus, Ceapro’s unaudited consolidated financial statements as at September 30, 2023 and the Management’s Discussion and Analysis for Interim Nine Month Periods Ended September 30, 2023 and 22 in Annex A and Annex B to this prospectus, and the unaudited pro forma condensed consolidated statement of financial position data of the Combined Company as at September 30, 2023 and the other information under “Unaudited Pro Form Condensed Consolidated Financial Information of the Combined Company” included herein. Figures are in thousands, except share data.

 

   As at September 30, 2023 

(unaudited)

(in thousands, except per share data)
  Actual   As Adjusted   As Adjusted 
   (in US $, except share data)  

(in US $, except share data)

   (in C$, except share data) 
             
Number of Common Shares issued and outstanding   4,855,876    12,245,969    12,245,969 
                
Cash and cash equivalents   38,756    42,188    57,038 
                
Warrant liability   -    10     13 
Deferred share unit liability   -    278    376 
Total non-current liabilities   11,980    13,713    18,540 
Shareholders’ equity:               
Share capital   293,410    22,790    30,812 
Warrants   5,085    -    - 
Contributed surplus   90,682    3,663    4,952 
Retained earnings (Deficit)   (362,088)   18,915    25,573 
Accumulated other comprehensive income   (811)   -    - 
Total capitalization   38,258    59,369    80,266 

 

The number of our Common Shares that will be outstanding before the offering is based on 4,855,876 shares outstanding as of September 30, 2023, and excludes as of such date:

 

  457,648 Common Shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of $21.76 per share;
     
  53,400 Common Shares issuable upon the exercise of outstanding stock options at a weighted average exercise price of $12.51 per share;
     
  303,250 Common Shares reserved for future issuance under our 2018 Long-Term Incentive Plan dated March 27, 2018;

 

The number of our Common Shares that will be outstanding immediately after the offering and the acquisition is based on 12,245,969 shares outstanding as of September 30, 2023, and excludes as of such date:

 

  457,648 Common Shares issuable upon the exercise of outstanding warrants at a weighted average exercise price of $21.76 per share;
     
  325,072 Common Shares issuable upon the exercise of outstanding stock options at a weighted average exercise price of $7.91 per share;
     
  874,048 Common Shares reserved for future issuance under our 2018 Long-Term Incentive Plan dated March 27, 2018;
     
  2,534,424 Common Shares issuable upon the exercise of Aeterna Zentaris New Warrants to be issued to investors in this offering at an exercise price of $0.01 per share;

 

The following table sets forth the capitalization of the Combined Company assuming the completion of the Plan of Arrangement, but without giving effect to the Consolidation.

 

Type of Security  Number(1) 
Common Shares    12,245,969 
Aeterna Zentaris warrants(2)   2,992,072 
Aeterna Zentaris options(3)   325,072 
Aeterna Zentaris DSUs   196,920 
Total Non-Current Liabilities  C$18,540,364 

 

Notes:

 

(1)Please see section entitled “Unaudited Pro Forma Combined Consolidated Financial Information of the Combined Company.”
(2)Amount includes Aeterna Zentaris Adjusted Warrants and Aeterna Zentaris New Warrants.
(3)Amount includes Aeterna Zentaris Options and the Replacement Options.

 

30
 

 

SELECTED HISTORICAL FINANCIAL INFORMATION OF AETERNA ZENTARIS

 

The following table sets forth summary consolidated financial and other data of Aeterna Zentaris as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 and as of September 30, 2023 and for each of the nine month periods ended September 30, 2023 and 2022. The following selected historical consolidated financial data of Aeterna Zentaris as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 was derived from Aeterna Zentaris’ historical consolidated financial statements included in Item 18 of our 20-F Amendment, which are incorporated by reference herein. The following selected historical consolidated financial data of Aeterna Zentaris as of September 30, 2023 and for each of the nine month periods ended September 30, 2023 and 2022 was derived from the Aeterna Zentaris’ unaudited condensed consolidated financial statements filed as Exhibit 99.1 to Nine-Month 6-K, which are incorporated by reference herein, and which, in the opinion of our management, have been prepared on the same basis as Aeterna Zentaris’ audited annual consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of Aeterna Zentaris’ results of operations and financial position for such periods. Results for the nine month periods ended September 30, 2023 and 2022 are not necessarily indicative of results that may be expected for the entire year.

 

The consolidated financial statements of Aeterna Zentaris have been prepared in accordance with IFRS, which differs in certain respects from US Generally Accepted Accounting Principles (“U.S. GAAP”).

 

You should read the following information together with “Risk Factors” beginning on page 16 and “Capitalization” on page 30 of this prospectus, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed as Exhibit 99.2 to the Nine Month 6-K, Item 5. “Operating and Financial Review and Prospects” of our Original Form 20-F and the consolidated financial statements and notes thereto of Aeterna Zentaris filed as Exhibit 99.1 to the Nine Month 6-K and included in Item 18 of our 20-F Amendment.

 

Consolidated Statements of Financial Position Data

 

   As of September 30,   As of December 31, 
(in thousands) 

2023

(unaudited)

   2022   2021 
   US$   US$   US$ 
Cash and cash equivalents   38,756    50,611    65,300 
Trade and other receivables and other current assets   3,064    4,648    5,447 
Inventory   91    229    73 
Restricted cash equivalents   320    322    335 
Property and equipment   255    216    192 
Other non-current assets           8,755 
Total assets   42,486    56,026    80,102 
Payables and accrued liabilities and income taxes payable   3,406    3,936    2,787 
Current portion of provisions   56    45    34 
Current portion of deferred revenues   90    2,949    4,815 
Current portion of deferred gain   529         
Lease liabilities   147    179    161 
Non-financial non-current liabilities(1)   11,980    13,141    19,319 
Total liabilities   16,208    20,250    27,116 
Shareholders’ equity   26,278    35,776    52,986 
Total liabilities and shareholders’ equity   42,486    56,026    80,102 

 

(1) Comprised mainly of employee future benefits, deferred gain, non-current portion of deferred revenues and provisions.

 

31
 

 

Consolidated Statements of Loss Information

 

  

Nine months ended September 30,

  

Years ended December 31,

 
(in thousands, except per share data)  2023   2022   2022   2021   2020 
   (unaudited)   (unaudited)             
   US$   US$   US$   US$   US$ 
Revenues   4,377    3,155    5,640    5,260    3,652 
Operating expenses                         
Cost of sales   167    106    157    90    2,317 
Research and development   9,692    8,081    12,506    6,574    1,506 
Selling, general and administrative   6,130    6,218    8,230    7,267    5,893 
Gain on modification of building lease                   (219)
Impairment of intangible assets           584         
Impairment of goodwill           7,642         
(Reversal of) impairment of other assets           124        (139)
Total operating expenses   15,989    14,405    29,243    13,931    9,358 
Loss from operations   (11,612)   (11,250)   (23,603)   (8,671)   (5,706)
Gains (loss) due to changes in foreign currency exchange rates   (44)   977    879    215    

572

 
Change in fair value of warrant liability                   1,147 
Interest income   739                  
Other finance costs       (3)   (3)   (21)   (736)
Net finance income (costs)   695    974    876    194    983 
Loss before income taxes   (10,917)   (10,276)   (22,727)   (8,477)   (4,723)
Income tax (expense) recovery               109    (395)
Net loss   (10,917)   (10,276)   (22,727)   (8,368)   (5,118)
Basic and diluted loss per share   (2.25)   (2.12)   (4.68)   (1.82)   (3.11)

 

32
 

 

SELECTED HISTORICAL FINANCIAL INFORMATION OF CEAPRO

 

The following table sets forth summary consolidated financial and other data of Ceapro as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 and as of September 30, 2023 and for each of the nine month periods ended September 30, 2023 and 2022. The following selected historical consolidated financial data of Ceapro as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 was derived from Ceapro’s historical consolidated financial statements beginning on page A-22 of Annex A to this prospectus. The following selected historical consolidated financial data of Ceapro as of September 30, 2023 and for each of the nine month periods ended September 30, 2023 and 2022 was derived from the Ceapro’s unaudited condensed interim consolidated financial statements beginning on page A-1 of Annex A to this prospectus, which, in the opinion of Ceapro’s management, have been prepared on the same basis as Ceapro’s audited annual consolidated financial statements and reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of Ceapro’s results of operations and financial position for such periods. Results for the nine month periods ended September 30, 2023 and 2022 are not necessarily indicative of results that may be expected for the entire year.

 

The consolidated financial statements of Ceapro have been prepared in accordance with IFRS, which differs in certain respects from U.S. GAAP.

 

You should read the following information together with “Risk Factors” beginning on page 16 of this prospectus, “Management Discussion and Analysis” of Ceapro for each of the nine month periods ended September 30, 2023 and 2022 and the three years ended December 31, 2022 included in Annex B and Annex C, respectively of this prospectus and the consolidated financial statements and the notes thereto of Ceapro as of September 30, 2023 and for each of the nine month periods ended September 30, 2023 and 2022 beginning on page A-1 of Annex A to this prospectus and as of December 31, 2022 and 2021 and for each of the three years ended December 31, 2022 beginning on page A-22 of Annex A to this prospectus.

 

Consolidated Statements of Financial Position Data

 

   As of September 30,   As of December 31, 
(in thousands) 

2023

(unaudited)

   2022  

2021

(Restated)1

 
   C$   C$   C$ 
Cash and cash equivalents   11,356    13,811    7,781 
Trade receivables   983    2,820    2,093 
Other receivables   82    65    46 
Inventories   5,371    3,757    2,324 
Prepaid expenses and deposits   214    135    163 
Investment tax credits receivable   855    855    767 
Deposits   77    77    79 
Licenses   10    12    15 
Property and equipment   14,996    16,202    17,500 
Deferred tax assets           283 
TOTAL ASSETS   33,944    37,734    31,051 
Accounts payable and accrued liabilities   1,246    1,730    682 
Current portion of lease liabilities   391    370    290 
Long-term lease liabilities   1,953    2,249    2,359 
Deferred tax liabilities   390    1,096     
TOTAL LIABILITIES   3,981    5,445    3,331 
Total Equity   29,963    32,289    27,720 
TOTAL LIABILITIES AND EQUITY   33,944    37,734    31,051 

 

 

1 During the year ended December 31, 2022, Ceapro corrected an error in its inventory costing. Consequently, Ceapro restated certain line items of its annual financial statements for the year ended December 31, 2021.

 

33
 

 

Consolidated Statements of Loss Information

 

   Nine months ended September 30,  

Years ended December 31,

 
(in thousands, except per share data) 

2023

  

2022

   2022  

2021

   2020 
   (unaudited)  

(unaudited)

            
       (Restated)1       (Restated)1     
   C$   C$   C$   C$   C$ 
Total Revenues   7,982    15,517    18,840    17,195    15,121 
Cost of goods sold   4,226    5,704    7,822    6,727    7,499 
Gross margin   3,756    9,813    11,018    10,468    7,622 
Research and product development   2,085    1,213    1,789    3,878    1,882 
General and administration   5,119    2,707    3,700    3,240    3,283 
Sales and marketing   34    21    30    47    111 
Finance costs   153    152    185    207    231 
(Loss) income from operations   (3,635)   5,720    5,314    3,096    2,115 
Other income (expense)   (349)   (340)   (463)   (202)   259 
(Loss) income before tax   (3,286)   6,060    5,777    3,298    1,856 
Income tax (benefit) expense   (706)   1,432    1,379    (67)    
Net (loss) income   (2,580)   4,628    4,398    3,365    1,856 
Basic net (loss) income per common share   (0.03)   0.06    0.6    0.04    0.02 
Diluted net (loss) income per common share   (0.03)   0.06    0.6    0.04    0.02 

 

 

1 During the year ended December 31, 2022, Ceapro corrected an error in its inventory costing. Consequently, Ceapro restated certain line items of its annual financial statements for the year ended December 31, 2021 and its interim financial statements for the nine -months ended September 30, 2022.

 

34
 

 

UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL INFORMATION OF THE COMBINED COMPANY

 

The following unaudited pro forma condensed consolidated financial information has been prepared in accordance with Article 11 of SEC Regulation S-X and applicable Canadian securities laws.

 

The following unaudited pro forma condensed consolidated statement of financial position of the Combined Company and its consolidated subsidiaries after giving effect to the Plan of Arrangement as of September 30, 2023 and the unaudited pro forma condensed consolidated statements of income (loss) of the Combined Company and its consolidated subsidiaries for the year ended December 31, 2022 and for the nine months ended September 30, 2023 present the combination of the financial information of Ceapro and Aeterna Zentaris Inc., after giving effect to the Plan of Arrangement.

 

The unaudited pro forma condensed consolidated statement of financial position as of September 30, 2023 gives pro forma effect to the Plan of Arrangement as if it had occurred on September 30, 2023. The unaudited pro forma condensed consolidated statements of income (loss) for the year ended December 31, 2022 and for the nine months ended September 30, 2023 give pro forma effect to the Plan of Arrangement as if they had occurred on January 1, 2022.

 

The unaudited pro forma condensed consolidated financial information has been derived from, and should be read in conjunction with, the historical financial statements of Ceapro and Aeterna Zentaris and the notes thereto, as well as the disclosures included and incorporated by reference in this prospectus. You should read the following summary unaudited pro forma condensed consolidated financial information together with “Risk Factors” beginning on page 16 and “Capitalization” on page 30 of this prospectus, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” filed as Exhibit 99.2 to the Nine Month 6-K, Item 5. “Operating and Financial Review and Prospects” of the Original Form 20-F, the consolidated financial statements and notes thereto of Aeterna Zentaris filed as Exhibit 99.1 to the Nine Month 6-K and included in Item 18 of out 20-F Amendment, “Management Discussions and Analysis” of Ceapro for each of the nine month periods ended September 30, 2023 and 2022 and the three years ended December 31, 2022 included in Annex B and Annex C, respectively of this prospectus and the consolidated financial statements and the notes thereto of Ceapro as of September 30, 2023 and for each of the nine month periods ended September 30, 2023 and 2022 beginning on page A-1 of Annex A attached to this prospectus and as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 beginning on page A-22 of Annex A attached to this prospectus.

 

The accounting policies used in the preparation of the unaudited pro forma condensed consolidated financial information incorporate the significant accounting policies used by Ceapro for the respective periods in the consolidated financial statements included in this prospectus.

 

The unaudited pro forma condensed consolidated financial information has been presented for illustrative purposes only and may not necessarily reflect what the Combined Company’s financial condition or results of operations would have been had the Plan of Arrangement occurred on the dates indicated. Further, the unaudited pro forma condensed consolidated financial information also may not be useful in predicting the future financial condition and results of operations of the Combined Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of this unaudited pro forma condensed consolidated financial information and are subject to change as additional information becomes available and analyses are performed.

 

Pro forma adjustments reflected in the unaudited pro forma condensed consolidated financial information are based on items that are factually supportable, directly attributable to the Plan of Arrangement for which there are firm commitments and impact the unaudited pro forma condensed consolidated financial information for which completed financial effects are objectively determinable.

 

35
 

 

Description of the Plan of Arrangement

 

Aeterna Zentaris and Ceapro entered into a binding arrangement agreement (the “Arrangement Agreement”) dated December 14, 2023 pursuant to which Aeterna Zentaris will acquire all of the issued and outstanding common shares of Ceapro in a transaction (the “Plan of Arrangement”) that will be effected by way of a plan of arrangement of Ceapro under the Canada Business Corporations Act pursuant to which, at closing, each outstanding Class A voting common share of Ceapro (“Ceapro Common Share”) will be exchanged for 0.09439 of a common share of Aeterna Zentaris (“Aeterna Zentaris Common Share”) (the “Exchange Ratio”).

 

Additionally, as part of the Plan of Arrangement, Aeterna Zentaris will issue to its shareholders immediately prior to the closing of the Plan of Arrangement, 0.47698 of a share purchase warrant (“New Warrant”) for each Aeterna Zentaris Common Share held. The Plan of Arrangement also provides for the issuance of replacement options (“Replacement Options”) to holders of Ceapro’s outstanding options on similar terms, as adjusted by the Exchange Ratio.

 

As a result, following the closing of the Plan of Arrangement, Aeterna Zentaris will own all of the issued and outstanding Ceapro Common Shares. Following the closing of the Plan of Arrangement, former shareholders of Ceapro will own approximately 50% of the Combined Company and former shareholders of Aeterna Zentaris will own approximately 50% of the Combined Company, assuming the exercise of all New Warrants.

 

In order to ensure that Aeterna Zentaris meets the Nasdaq listing requirements under Nasdaq Listing Rules 5505(a) and (b) which require, among other things, that listed securities of Aeterna Zentaris have a minimum bid price of US$4.00 per share, or a minimum closing price of US$2.00 to US$3.00 per share, the issued and outstanding Aeterna Zentaris Common Shares will consolidate on the basis of a range of one post-consolidation Aeterna Zentaris Common Share for every three to four pre-consolidation Aeterna Zentaris Common Shares (the “Consolidation”).

 

In order to become effective, the Plan of Arrangement requires, among other things, Aeterna Zentaris shareholder approval, Ceapro shareholder approval, regulatory approvals, including approval of the Plan of Arrangement by the Court of Kings Bench of Alberta, receipt of various stock exchange approvals and the satisfaction of certain closing conditions customary to transactions of this nature.

 

Anticipated Accounting Treatment

 

The Plan of Arrangement will be accounted for as a reverse business acquisition in accordance with IFRS. Aeterna Zentaris will be treated as the “acquiree” for accounting purposes. Ceapro has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances, and accordingly the Plan of Arrangement is treated as a reverse take over.

 

Ceapro’s existing shareholders and Aeterna Zentaris’ existing shareholders will have the equal voting interest in the Combined Company under fully diluted basis considering the New Warrants with an approximately 50.0% voting interest each;
   
The Ceapro Chief Executive Officer will continue as Chief Executive Officer of the Combined Company;
   
Directors of Ceapro will form a majority on the board of directors of the Combined Company; and
   
Ceapro is the larger entity based on historical total assets, excluding cash on hand, and revenues.

 

The fair value of the consideration for the acquisition of the Aeterna Zentaris Common Shares will ultimately be based on the market price of the Ceapro Common Shares immediately prior to the closing of the Plan of Arrangement. The market price of the Combined Company Common Share is expected to be influenced by a number of factors that are out of the control of the Combined Company, included but not limited to the market’s perception of the Plan of Arrangement and other developments that could arise between the filing of this prospectus and the closing of the Plan of Arrangement.

 

On January 8, 2024, the trading price of Ceapro Common Shares was C$0.18 per share. For purposes of the accompanying unaudited pro forma condensed consolidated financial information, the estimated fair value of the Combined Company Common Shares is preliminary and will change based on fluctuations in the trading prices of the Ceapro Common Shares through to the closing of the Plan of Arrangement. Adjustments to the Combined Company’s ultimate accounting for the Plan of Arrangement arising from such changes could be material.

 

36
 

 

Basis of Pro Forma Presentation

 

All dollar amounts are expressed in Canadian dollars (“C$”) unless otherwise noted as US dollars (“US$”). The historical financial information of Aeterna Zentaris has been translated to C$ from US$ based on exchange rates disclosed in the accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Information.

 

The following summarizes the pro forma ownership of Combined Company Common Shares following the Plan of Arrangement:

 

   % 
Shares held by current Ceapro shareholders   50.0%
Shares held by current Aeterna Zentaris shareholders(1)   50.0 
Pro Forma Combined Company Common Shares   100.0%

 

(1) Includes the 2,534,424 Combined Company Common Shares issuable to the current Aeterna Zentaris shareholders and Aeterna Zentaris warrant holders upon exercise of their New Warrants.

 

Additional Combined Company Common Shares could be issued in the future that would dilute the above ownership percentages:

 

Exercisable currently or immediately following the closing of the Plan of Arrangement     
Existing warrants issued by Aeterna Zentaris   457,648 
Replacement options held by Ceapro employees   231,443 
Existing options held by Aeterna Zentaris employees   21,677 

 

37
 

 

Unaudited Pro Forma Condensed Consolidated Statement of Financial Position as of September 30, 2023

 

   Ceapro Inc.   Aeterna Zentaris Inc.   Transaction Accounting Adjustments   Notes   Pro Forma Combined Company 
   C$   C$   C$       C$ 
   Note 4(a)   Note 3             
ASSETS                         
Current assets                         
Cash and cash equivalents   11,355,731    52,398,112    (2,766,181)   4(d)    57,038,264 
              (3,949,398)   4(e)      
Trade and other receivables       738,192    1,064,739    4(b)    1,802,931 
Trade receivables   982,895        (982,895)   4(b)     
Other receivables   81,844        (81,844)   4(b)     
Inventory   5,370,967    123,032              5,493,999 
Income taxes receivable       156,832              156,832 
Prepaid expenses and other current assets   214,371    3,247,504              3,461,875 
Total current assets   18,005,808    56,663,672    (6,715,579)        67,953,901 
                          
Non-current assets                         
Investment tax credits receivable   854,895                  854,895 
Deposits   76,954                  76,954 
Licenses   10,366                  10,366 
Restricted cash equivalents       432,640              432,640 
Property and equipment   14,996,189    344,760              15,340,949 
Intangible assets           2,950,064    4(c)    2,950,064 
Total non-current assets   15,938,404    777,400    2,950,064         19,665,868 
Total assets   33,944,212    57,441,072    (3,765,515)        87,619,769 
                          
LIABILITIES                         
Current liabilities                         
Payables and accrued liabilities   1,246,197    4,461,600              5,707,797 
Provisions       75,712              75,712 
Income taxes payable       143,312              143,312 
Deferred revenues       121,680              121,680 
Deferred gain       715,208              715,208 
Warrant liability           4,828,499    4(c)    13,093 
              (4,815,406)   4(f)      
DSU liability           376,117    4(c)    376,117 
Lease liabilities   391,241    198,744              589,985 
Total current liabilities   1,637,438    5,716,256    389,210         7,742,904 
Non-current liabilities                         
Deferred revenues       2,226,744              2,226,744 
Deferred tax liabilities   390,109                  390,109 
Lease liabilities   1,953,295    94,640              2,047,935 
Employee future benefits       13,661,960              13,661,960 
Provisions       213,616              213,616 
Total non-current liabilities   2,343,404    16,196,960             18,540,364 
Total liabilities   3,980,842    21,913,216    389,210         26,283,268 
                          
Shareholders’ equity                         
Share capital   16,721,867    396,690,320    (396,690,320)   4(c)    30,811,996 
              9,274,723    4(c)      
              4,815,406    4(f)      
Contributed surplus   4,941,386    129,476,984    (129,476,984)   4(c)    4,951,849 
              10,463    4(c)      
Retained earnings (deficit)   8,300,117    (489,542,976)   (3,949,398)   4(e)    25,572,656 
              493,492,374    4(c)      
              20,038,720    4(c)      
              (2,766,181)   4(d)      
Accumulated other comprehensive loss       (1,096,472)   1,096,472    4(c)     
Total shareholders’ equity   29,963,370    35,527,856    (4,154,725)        61,336,501 
Total liabilities and shareholders’ equity   33,944,212    57,441,072    (3,765,515)        87,619,769 

 

38
 

 

Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss) for the year ended December 31, 2022

 

   Ceapro Inc.   Aeterna Zentaris Inc.   Transaction Accounting Adjustments   Notes   Pro Forma Combined Company 
   C$   C$   C$       C$ 
   (except share and per share data) 
   Note 5(a)   Note 3             
Revenues   18,839,607    7,363,584              26,203,191 
Cost of goods sold   7,821,908    204,979              8,026,887 
Gross margin   11,017,699    7,158,605             18,176,304 
                          
Research and development   1,788,666    16,327,834    231,748    5(f)    18,348,248 
Selling, general and administrative       10,745,088    3,730,056    5(b)    21,190,723 
              2,766,181    5(d)      
              3,949,398    5(e)      
General and administration   3,700,498        (3,700,498)   5(b)     
Sales and marketing   29,558        (29,558)   5(b)     
Finance costs   184,967        (184,967)   5(b)     
Impairment of intangible assets       762,470              762,470 
Impairment of goodwill       9,977,395              9,977,395 
Impairment of other assets       161,894              161,894 
Bargain purchase gain           (20,038,720)   5(c)    (20,038,720)
Income (loss) from operations   5,314,010    (30,816,076)   13,276,360         (12,225,706)
                          
Finance costs       3,917    184,967    5(b)    188,884 
Other income   (462,905)   (1,147,622)             (1,610,527)
Income (loss) before income taxes   5,776,915    (29,672,371)   13,091,393         (10,804,063)
                          
Income tax expense   1,378,817        (636,222)   5(g)    742,595 
Net income (loss)   4,398,098    (29,672,371)   13,727,615         (11,546,658)
                          
Basic and diluted loss per share   0.06              7    (0.78)
                          
Weighted average number of shares outstanding                         
Basic   77,961,714              7    14,780,393 
Diluted   78,582,083              7    14,780,393 

 

39
 

 

Unaudited Pro Forma Condensed Consolidated Statement of Income (Loss) for the nine months ended September 30, 2023

 

   Ceapro Inc.   Aeterna Zentaris Inc.   Transaction Accounting Adjustments   Notes   Pro Forma Combined Company 
   C$   C$   C$       C$ 
   (except share and per share data) 
   Note 6(a)   Note 3             
Revenues   7,982,542    5,902,822              13,885,364 
Cost of goods sold   4,226,411    225,216              4,451,627 
Gross margin   3,756,131    5,677,606             9,433,737 
                          
Research and development   2,085,127    13,070,631    179,536    6(c)    15,335,294 
Selling, general and administrative       8,266,918    5,152,869    6(b)    13,419,787 
General and administration   5,119,395        (5,119,395)   6(b)     
Sales and marketing   33,474        (33,474)   6(b)     
Finance costs   152,894        (152,894)   6(b)     
Loss from operations   (3,634,759)   (15,659,943)   (26,642)        (19,321,344)
                          
Finance income       (996,615)   152,894    6(b)    (843,721)
Other expense (income)   (348,957)   59,338              (289,619)
Loss before income taxes   (3,285,802)   (14,722,666)   (179,536)        (18,188,004)
                          
Income tax benefit   (705,859)                 (705,859)
Net loss   (2,579,943)   (14,722,666)   (179,536)        (17,482,145)
                          
Basic and diluted loss per share   (0.03)             7    (1.18)
                          
Weighted average number of shares outstanding (basic and diluted)   78,265,631              7    14,780,393 

 

Notes to Pro Forma Condensed Consolidated Financial Information

 

1. Description of the Plan of Arrangement

 

Summary of business

 

Ceapro is a Canadian biopharmaceutical company involved in the development and commercialization of “active ingredients” derived from oats and other renewable plant resources for healthcare and cosmetic industries. Ceapro’s primary business activities relate to the development and commercialization of natural products for the personal care, cosmetic, human and animal health industries using proprietary technology, natural, renewable resources and developing innovative products, technologies and delivery systems.

 

Aeterna Zentaris is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. Aeterna Zentaris’ 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. Aeterna Zentaris’ 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. Aeterna Zentaris is actively pursuing business development opportunities for the commercialization of macimorelin in North America, Asia and the rest of the world. Aeterna Zentaris 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.

 

40
 

 

Aeterna Zentaris and Ceapro entered into a binding arrangement agreement (the “Arrangement Agreement”) dated December 14, 2023 pursuant to which Aeterna Zentaris will acquire all of the issued and outstanding common shares of Ceapro (the “Plan of Arrangement”). The Plan of Arrangement will be effected by way of a plan of arrangement of Ceapro under the Canada Business Corporations Act pursuant to which, at closing, each outstanding Ceapro common share will be exchanged for 0.09439 of a Aeterna Zentaris Common Share (the “Exchange Ratio”).

 

Additionally, as part of the Plan of Arrangement, Aeterna Zentaris will issue to its shareholders immediately prior to the closing of the Plan of Arrangement, 0.47698 of a share purchase warrant (“New Warrant”) for each Aeterna Zentaris Common Share held. The Plan of Arrangement also provides for the issuance of replacement options (“Replacement Options”) to holders of Ceapro’s outstanding options on similar terms, as adjusted by the Exchange Ratio.

 

As a result, following the closing of the Plan of Arrangement, Aeterna Zentaris will own all of the issued and outstanding Ceapro Common Shares. Following the closing of the Plan of Arrangement, former shareholders of Ceapro will own approximately 50% of the Combined Company and former shareholders of Aeterna Zentaris will own approximately 50% of the Combined Company, assuming the exercise of all New Warrants.

 

In order to ensure that Aeterna Zentaris meets the Nasdaq listing requirements under Nasdaq Listing Rules 5505(a) and (b) which require, among other things, that listed securities of Aeterna Zentaris have a minimum bid price of US$4.00 per share, or a minimum closing price of US$2.00 to US$3.00 per share, the issued and outstanding Aeterna Zentaris Common Shares will consolidate on the basis of a range of one post-consolidation Aeterna Zentaris Common Share for every three to four pre-consolidation Aeterna Zentaris Common Shares (the “Consolidation”).

 

In order to become effective, the Plan of Arrangement requires, among other things, Aeterna Zentaris shareholder approval, Ceapro shareholder approval, regulatory approvals, including approval of the Plan of Arrangement by the Court of Kings Bench of Alberta, receipt of various stock exchange approvals and the satisfaction of certain closing conditions customary to transactions of this nature.

 

2. Basis of presentation

 

The unaudited pro forma condensed consolidated financial information has been prepared in accordance with Article 11 of SEC Regulation S-X and applicable Canadian securities laws.

 

The Plan of Arrangement will be accounted for as a reverse business acquisition in accordance with IFRS. Aeterna Zentaris will be treated as the “acquiree” for accounting purposes. Ceapro has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances, and accordingly the Plan of Arrangement is treated as a reverse take over.

 

41
 

 

The fair value of the consideration for the acquisition of the Aeterna Zentaris Common Shares will ultimately be based on the market price of the Ceapro Common Shares immediately prior to the closing of the Plan of Arrangement. The market price of the Combined Company Common Share is expected to be influenced by a number of factors that are out of the control of the Combined Company, included but not limited to the market’s perception of the Plan of Arrangement and other developments that could arise between the filing of this prospectus and the closing of the Plan of Arrangement.

 

On January 8, 2024, the trading price of Ceapro Common Shares was C$0.18 per share. For purposes of the accompanying unaudited pro forma condensed consolidated financial information, the estimated fair value of the Combined Company Common Shares is preliminary and will change based fluctuations in the trading prices of the Ceapro Common Shares through to the closing of the Plan of Arrangement. Adjustments to the Combined Company’s ultimate accounting for the Plan of Arrangement arising from such changes could be material. The following unaudited pro forma condensed consolidated statement of financial position of the Combined Company and its consolidated subsidiaries after giving effect to the Plan of Arrangement as of September 30, 2023 and the unaudited pro forma condensed consolidated statements of income (loss) of the Combined Company and its consolidated subsidiaries for the nine months ended September 30, 2023 and for the year ended December 31, 2022 present the combination of the financial information of Ceapro and Aeterna Zentaris, after giving effect to the Plan of Arrangement.

 

The unaudited pro forma condensed consolidated financial information does not include any operating efficiencies or cost savings and accordingly only includes Plan of Arrangement accounting adjustments. The Plan of Arrangement accounting adjustments presented in the pro forma financial information are made to provide relevant information necessary for an understanding of the Combined Company reflecting the accounting for the Plan of Arrangement.

 

The unaudited pro forma condensed consolidated statement of financial position as of September 30, 2023 has been prepared by management for the purposes of presenting the impact of the Plan of Arrangement as if it had occurred on September 30, 2023. The unaudited pro forma condensed consolidated statement of income (loss) for the nine months ended September 30, 2023 and for the year ended December 31, 2022 have been prepared by management for the purposes of presenting the impact of the Plan of Arrangement as if it had occurred on January 1, 2022.

 

The unaudited pro forma condensed consolidated financial information has been derived from and should be read in conjunction with:

 

The unaudited pro forma condensed consolidated financial information, including the notes thereto, should be read in conjunction with the Ceapro and Aeterna Zentaris historical financial statements, and their respective Management’s Discussion and Analysis of financial condition and results of operations included elsewhere and incorporated by reference in this prospectus. The historical financial information of Ceapro and Aeterna Zentaris are prepared in accordance with the IFRS.

 

The unaudited pro forma condensed consolidated financial information is based on assumptions and adjustments that are described in the accompanying notes. The pro forma adjustments presented herein are preliminary and are based on available financial information and certain estimates and assumptions. Management believes that such assumptions provide a reasonable basis for presenting all the significant effects of the contemplated transactions, and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied to the unaudited pro forma condensed consolidated financial information. The actual adjustments to the consolidated financial statements of the Combined Company will likely differ from the pro forma adjustments herein.

 

42
 

 

The unaudited pro forma condensed consolidated financial information has been presented for illustrative purposes only and do not necessarily reflect what the Combined Company’s financial condition or results of operations would have been had the Plan of Arrangement occurred on the dates indicated. Further, the unaudited pro forma condensed consolidated financial information also may not be useful in predicting the future financial condition and results of operations of the Combined Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors, and it is possible the difference may be material.

 

The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of this unaudited pro forma condensed consolidated financial information and are subject to change as additional information becomes available and analyses are performed.

 

Pro forma adjustments reflected in the unaudited pro forma condensed consolidated financial information are based on items that are factually supportable, directly attributable to the Plan of Arrangement of or which there are firm commitments and impact the unaudited pro forma condensed consolidated financial information for which completed financial effects are objectively determinable.

 

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. The pro forma adjustments reflecting the Plan of Arrangement are based on certain currently available information and certain assumptions and methodologies that Management believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Plan of Arrangement based on information available at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed consolidated financial information.

 

Ceapro and Aeterna Zentaris have not had any historical relationship prior to the Plan of Arrangement. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

The following summarizes the pro forma ownership of Combined Company Common Shares following the Plan of Arrangement:

 

   % 
Shares held by current Ceapro shareholders   50.0%
Shares held by current Aeterna Zentaris shareholders(1)   50.0 
Pro Forma Combined Company Common Shares   100.0%

 

 

(1) Includes the 2,534,424 Combined Company Common Shares issuable to the current Aeterna Zentaris shareholders and Aeterna Zentaris warrant holders upon exercise of their New Warrants.

 

43
 

 

Additional Combined Company Common Shares could be issued in the future that would dilute the above ownership percentages:

 

Exercisable currently or immediately following the closing of the Plan of Arrangement     
Existing warrants issued by Aeterna Zentaris   457,648 
Replacement options held by Ceapro employees   231,443 
Existing options held by Aeterna Zentaris employees   21,677 

 

3.Adjustments to Unaudited Pro Forma Condensed Consolidated Financial Information

 

The historical financial information of Aeterna Zentaris was presented in US dollars. The following tables reflect the adjusted financial statements derived from the audited consolidated financial statements of Aeterna Zentaris as at and for the year ended December 31, 2022 and the unaudited condensed interim consolidated financial statements of Aeterna Zentaris for the nine months ended September 30, 2023 as a result of the translation from U.S. dollars to Canadian dollars and reclassifications from line to line in order to provide a consistent classification and presentation with the Combined Company’s consolidated financial statement presentation (the “adjustments”). Management has reviewed and determined there were no significant differences in accounting policies applied by Aeterna Zentaris and Ceapro. These adjustments reflect Management’s best estimates based upon the information currently available to Management and could be subject to change once more detailed information is obtained.

 

The statement of financial position as at September 30, 2023 was translated at a spot exchange rate of C$1.3520 = US$1.00. The statement of income (loss) for the year ended December 31, 2022 was translated at the average exchange rate of C$1.3056 = US$1.00, and the statement of income (loss) for the nine months ended September 30, 2023 was translated at the average exchange rate of C$1.3486 = US$1.00.

 

44
 

 

The table below presents Aeterna Zentaris’ statement of financial position as at September 30, 2023, converted in Canadian dollars:

 

   Thousands of US$   Reclassifications   US$   C$ 
ASSETS                    
Current assets                    
Cash and cash equivalents   38,756         38,756,000    52,398,112 
Trade and other receivables   546         546,000    738,192 
Inventory   91         91,000    123,032 
Income taxes receivable   116         116,000    156,832 
Prepaid expenses and other current assets   2,402         2,402,000    3,247,504 
Total current assets   41,911        41,911,000    56,663,672 
                     
Non-current assets                    
Restricted cash equivalents   320         320,000    432,640 
Property and equipment   255         255,000    344,760 
Total non-current assets   575        575,000    777,400 
Total assets   42,486        42,486,000    57,441,072 
                     
LIABILITIES                    
Current liabilities                    
Payables and accrued liabilities   3,300         3,300,000    4,461,600 
Provisions   56         56,000    75,712 
Income taxes payable   106         106,000    143,312 
Deferred revenues   90         90,000    121,680 
Deferred gain   529         529,000    715,208 
Lease liabilities   147         147,000    198,744 
Total current liabilities   4,228        4,228,000    5,716,256 
Non-current liabilities                    
Deferred revenues   1,647         1,647,000    2,226,744 
Lease liabilities   70         70,000    94,640 
Employee future benefits   10,105         10,105,000    13,661,960 
Provisions   158         158,000    213,616 
Total non-current liabilities   11,980        11,980,000    16,196,960 
Total liabilities   16,208        16,208,000    21,913,216 
                     
Shareholders’ equity                    
Share capital   293,410         293,410,000    396,690,320 
Warrants   5,085    (5,085)        
Contributed surplus   90,682    5,085    95,767,000    129,476,984 
Deficit   (362,088)        (362,088,000)   (489,542,976)
Accumulated other comprehensive loss   (811)        (811,000)   (1,096,472)
Total Shareholders’ equity   26,278        26,278,000    35,527,856 
Total liabilities and shareholders’ equity   42,486        42,486,000    57,441,072 

 

45
 

 

The table below presents Aeterna Zentaris’ statement of net loss for the year ended December 31, 2022, converted in Canadian dollars.

 

   Thousands of US$   Reclassifications   US$   C$ 
Revenues   5,640         5,640,000    7,363,584 
Cost of goods sold        157    157,000    204,979 
Gross margin             5,483,000    7,158,605 
                     
Expenses                    
Cost of sales   157    (157)          
Research and development   12,506         12,506,000    16,327,834 
Selling, general and administrative   8,230         8,230,000    10,745,088 
Impairment of intangible assets   584         584,000    762,470 
Impairment of goodwill   7,642         7,642,000    9,977,395 
Impairment of other assets   124         124,000    161,894 
Total operating expenses   29,243                
                     
Loss from operations   (23,603)       (23,603,000)   (30,816,076)
                     
Finance costs       3    3,000    3,917 
Other income       (879)   (879,000)   (1,147,622)
                     
Gain due to changes in foreign currency exchange rates   (879)   879           
Other finance costs   3    (3)          
Net finance income   (876)   876           
                     
Net loss   (22,727)       (22,727,000)   (29,672,371)

 

46
 

 

The table below presents Aeterna Zentaris’ statement of net loss for the nine months ended September 30, 2023, converted in Canadian dollars.

 

   Thousands of US$   Reclassifications   US$   C$ 
Revenues   4,377         4,377,000    5,902,822 
Cost of goods sold        167    167,000    225,216 
Gross margin             4,210,000    5,677,606 
                     
Expenses                    
Cost of sales   167    (167)          
Research and development   9,692         9,692,000    13,070,631 
Selling, general and administrative   6,130         6,130,000    8,266,918 
Total operating expenses   15,989                
                     
Loss from operations   (11,612)       (11,612,000)   (15,659,943)
                     
Finance income       (739)   (739,000)   (996,615)
Other expense (income)       44    44,000    59,338 
                     
Loss due to changes in foreign currency exchange rates   44    (44)          
Interest income   (739)   739           
Net finance income   (695)   695           
                     
Net loss   (10,917)       (10,917,000)   (14,722,666)

 

4.Adjustments to the Pro Forma Condensed Consolidated Statement of Financial Position

 

The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:

 

Pro Forma Notes

 

  (a) Derived from the consolidated statement of financial position of Ceapro Inc. as at September 30, 2023.
  (b) To reflect reclassifications from line to line in order to provide a consistent classification and presentation of the Combined Company consolidated financial statement presentation.

 

Pro forma Transaction Accounting Adjustments

 

(c) Business acquisition

 

To reflect the preliminary estimated gain on bargain purchase recognized in accordance with IFRS 3, for the excess of the net acquisition date amounts of the identifiable assets acquired and liabilities assumed over the fair value of consideration transferred.

 

47
 

 

The following table reflects the effect of Aeterna Zentaris’ preliminary purchase price allocation:

 

   Number   C$ 
Purchase price          
Equity instruments:          
Shares deemed issued to Aeterna Zentaris shareholders(1)   4,855,876    9,274,723 
Replacement share-based payment awards:          
Equity-settled options(2)   53,400    10,463 
Cash-settled DSUs(2)   196,920    376,117 
         9,661,303 
           
Provisional recognized amounts of identifiable assets acquired and liabilities assumed          
Cash and cash equivalents(4)        48,448,714 
Trade and other receivables        738,192 
Inventories        123,032 
Income tax receivables        156,832 
Prepaid expenses and deposits        3,247,504 
Restricted cash equivalents        432,640 
Property and equipment        344,760 
Intangible assets(5)        2,950,064 
Accounts payable and accrued liabilities        (4,461,600)
Provisions        (289,328)
Income tax payable        (143,312)
Deferred revenues        (2,348,424)