FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
------------------------
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November 2002
AETERNA LABORATORIES INC.
---------------------------
(Translation of registrant's name into English)
1405, boul. du Parc-Technologique
Quebec, Quebec
Canada, G1P 4P5
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F Form 40-F X
----- -----
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-____.
Documents index
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1. AEterna's Interim Report 2002 - Third Quarter (Q3)
Dear shareholders,
The quarter was marked by the signing of an agreement with Australian
multinational Mayne Group for the eventual commercialization of Neovastat(R) in
Australia, New-Zealand, Canada and Mexico. Furthermore, consolidated revenues of
our subsidiary Atrium increased by 35% while net earnings increased by
37% compared to the same period last year. This sustained growth is due to the
successful integration of Unipex into Atrium during the last year and by the
quality of its products and business network which enabled it to gain additional
market share.
Hence, AEterna and Atrium met our growth strategy goals for this quarter and are
well positioned to pursue expansion based on both internal growth and
acquisitions.
Finally, with $88 million in net cash, we are in a solid financial position to
ensure Neovastat's development over the next few years.
MILESTONES
ATRIUM SALES FOR THIS QUARTER UP 35% AND NET EARNINGS UP 37% / Revenues
increased by 35% for the third quarter reaching $24.4 million compared to
$18.1 million a year ago. Consolidated net earnings reached $1.61 million
compared to $1.17 million for the same period last year, a 37% increase.
STRATEGIC ALLIANCES / The signing of a strategic alliance with Australian
multinational Mayne Group allows AEterna to extend its coverage to 45% of the
worldwide oncology market and reach the $50 million mark in milestone payments.
Furthermore, the Radiation Therapy Oncology Group (RTOG) joined the Community
Clinical Oncology Program (CCOP) sites sponsored by the National Cancer
Institute (NCI) for patient enrollment and conduct of the Neovastat Phase III
clinical trial in non-small cell lung cancer.
APPOINTMENTS / Claude Cardinal was appointed Vice President to AEterna,
Technical Operations. He is responsible for activities related to the technical
development and manufacture of drugs according to pharmaceutical industry
standards. He has more than 25 years of experience in management and
manufacturing according to pharmaceutical standards.
Yves Milord, President and COO of SGF Soquia, was appointed to Atrium's Board of
Directors. Mr. Milord has more than 25 years experience in business management
and development. He occupied key management positions notably as Executive Vice
President at Metro-Richelieu and as Vice President and General Manager of
Provigo
SCIENTIFIC ARTICLES / Results of a Phase II study in kidney cancer with
Neovastat were published in the European scientific review ANNALS OF ONCOLOGY
(Batist G., Champagne P., Croteau D., Levinton C., Hariton C., Escudier B. and
Dupont E. ANN ONCOL 13 (8) :1259-63, 2002). Also, an article on Neovastat's
capacity to induce apoptosis of endothelial cells was published in MOLECULAR
CANCER THERAPEUTICS (Boivin D., Gendron S., Beaulieu E., Gingras D., Beliveau R.
MOL CANCER THERAP 1: 795-802, 2002). Finally, results of a Phase I/II study with
Neovastat in plaque psoriasis were published in the JOURNAL OF AMERICAN ACADEMY
OF DERMATOLOGY (Daniel N.
Sauder, Joel DeKoven, Pierre Champagne, Daniel Croteau and Eric Dupont.
J AM ACAD DERMATOL 2002; 47:535-41).
OUTLOOK
What we have achieved during these past few months allows us to accelerate
Neovastat's development with our strategic partners and to complete the Phase
III trial in kidney cancer. Conclusive results of this trial could enable us to
become the first company to bring an angiogenesis inhibitor to the market in
cancer. We are also pursuing efforts with respect to our program of acquiring
new technologies in cancer treatment.
Eric Dupont, PhD
Chairman of the Board and Chief Executive Officer
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following analysis explains the variations in the Company's results of
operations, financial condition and cash flow. This discussion should be read in
conjunction with the information contained in AEterna Laboratories Inc.'s
interim consolidated financial statements and related notes for the nine-month
period ended September 30, 2002 and 2001. Furthermore, it provides an update of
the Management's discussion and analysis of financial condition included in the
2001 annual report. All figures are in Canadian dollars.
RESULTS OF OPERATIONS
REVENUES
Company revenues are generated by the subsidiary Atrium Biotechnologies Inc.
(Atrium) whose consolidated sales reached $24.4 million during this quarter,
compared to $18.1 million for the corresponding quarter last year. For the
nine-month period ended September 30, 2002, the consolidated revenues were
$73.2 million compared to $23.6 million in 2001. The increase for the quarter
can be attributed to the successful integration of Unipex during the last year
and to the development of our business network which enabled the Company to
gain additional market share. For the nine-month period, the increase is mainly
due to sales generated by Unipex Finance S.A. (Unipex), a French company
acquired by Atrium in July 2001.
OPERATING EXPENSES
The cost of sales during this quarter amounted to $18.9 million compared to
$13.7 million for the same quarter in 2001. For the nine-month period ended
September 30, 2002, the cost of sales has gone up from $14.6 million to
$56.4 million.These costs are in direct proportion to corresponding revenues
and the percentage of these costs against revenues has not varied significantly
during the quarter, while the variation for the nine-month period results from
the acquisition of Unipex.
Selling and administrative expenses amounted to $2.4 million during this quarter
compared to $2.0 million in 2001. Regarding the nine-month period, selling and
administrative expenses were $7.1 million compared to $3.7 million in 2001. The
acquisition of Unipex explains these variations for the nine-month period
compared to last year.
R&D investments amounted to $8.3 million during this quarter in comparison with
$7.2 million last year. For the nine-month period ended September 30, 2002, R&D
investments reached $23.4 million in comparison to $21 million in 2001. This
increase can be attributed to the costs related to the follow-up of patients
enrolled in our Phase III clinical studies and also to the costs incurred for
the preparation of Neovastat's Basic International Registration dossier.
R&D tax credits and grants reached $0.3 million for this quarter compared with
$0.8 million in 2001. The decrease in the eligible expenses of current grant
programs explains this situation. As of September 30, 2002, R&D tax credits and
grants totalled $1.4 million compared to $5.4 million for the same period
last year.
Interest income was $1 million for the three-month period ended September 30,
2002 in comparison with $0.6 million for the same period last year. For the
cumulative nine-month
period, interest income reached $2.4 million, compared to $2.7 million for the
same period in 2001. Interest income for this quarter was higher compared to
last year, due to increased short term investments following the $57 million
private placement in April 2002.
The income tax expense for this first quarter as well as for the nine-month
period of 2002 comes from Atrium and its subsidiaries while in 2001, the income
tax expense was due only to the Unipex subsidiary.
The loss before the gain on dilution for this third quarter amounted to
$6.7 million or 16 cents per share compared to a loss before the gain on
dilution of $5 million or 16 cents per share for the same quarter in 2001.
For the nine-month period ended September 30, 2002, the loss before the gain
on dilution increased by $7.3 million, from $10.9 million to $18.2 million. The
increase of the loss before the gain on dilution for this quarter as well as
for the nine-month period, is mainly due to larger investments in R&D net
of grants.
LIQUIDITY AND CAPITAL RESOURCES
The cash position of the Company as at September 30, 2002 remains strong with
$88.7 million in cash and short-term investments compared with $54.1 million as
at December 31, 2001. The private placement of $57 million concluded in the
second quarter strengthened the Company's growth strategy.
During this nine-month period, an amount of $16.8 million was used in operating
activities while $56.5 million was provided through financing activities, mainly
by the private placement. Regarding investment activities, capital and
intangible assets were acquired for an amount of $4.5 million, of which
$3.2 million were used for production line scale-up in preparing for production
at an eventual commercial level. Furthermore, $1.3 million was used for an
acquisition of a company.
RISK FACTORS
Economic and sector related risks are the same as those identified in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Company's 2001 Annual Report.
Dennis Turpin, CA
Vice President and Chief Financial Officer
This report contains forward-looking statements, which are made pursuant to the
safe harbor provisions of the U.S. Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which could cause the Company's actual results to differ materially from those
in the forward-looking statements. Such risks and uncertainties include, among
others, the availability of funds and resources to pursue R&D projects, the
successful and timely completion of clinical studies, the ability of the Company
to take advantage of the business opportunities in the pharmaceutical industry,
uncertainties related to the regulatory process and general changes in economic
conditions. Investors should consult the Company's ongoing quarterly and annual
filings with the Canadian and U.S. securities commissions for additional
information on risks and uncertainties relating to the forward-looking
statements. Investors are cautioned not to rely on these forward-looking
statements. The Company does not undertake to update these forward-looking
statements.
AETERNA LABORATORIES INC.
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
AS AT AS AT
SEPTEMBER 30, DECEMBER 31,
2002 2001
-------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 27,298,842 $11,993,502
Short-term investments 61,389,725 42,070,976
Accounts receivable 30,478,574 23,361,630
Income taxes recoverable - 154,684
Research and development tax credits recoverable 2,313,894 1,295,000
Inventory 9,893,456 8,303,697
Prepaid expenses 1,416,036 1,161,587
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132,790,527 88,341,076
PROPERTY, PLANT AND EQUIPMENT 18,138,117 15,403,984
INTANGIBLE ASSETS AND GOODWILL 27,015,275 24,252,487
FUTURE INCOME TAX ASSETS 5,044,481 6,354,170
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$182,988,400 $134,351,717
=================================================================================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 26,895,782 $ 23,429,717
Income taxes 654,136 -
Current portion of long-term debt 3,383,460 3,447,688
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30,933,378 26,877,405
LONG-TERM DEBT 12,006,942 10,400,969
EMPLOYEE FUTURE BENEFITS 147,170 115,952
NON-CONTROLLING INTEREST 23,244,534 18,338,602
-------------------------------------------------------------------------------------------------
66,332,024 55,732,928
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SHAREHOLDERS' EQUITY
SHARE CAPITAL 152,137,202 97,513,214
CONTRIBUTED SURPLUS 853,699 -
DEFICIT (36,854,674) (19,082,451)
CUMULATIVE TRANSLATION ADJUSTMENT 520,149 188,026
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116,656,376 78,618,789
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$182,988,400 $134,351,717
=================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
AETERNA LABORATORIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(expressed in Canadian dollars)
QUARTERS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
UNAUDITED 2002 2001 2002 2001
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Revenues $24,406,745 $18,138,184 $ 73,195,628 $ 23,573,087
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OPERATING EXPENSES
Cost of sales 18,863,694 13,744,882 56,349,540 14,600,148
Selling and administrative 2,434,107 2,006,643 7,107,734 3,701,301
Research and development costs 8,311,970 7,157,309 23,443,772 21,047,208
Research and development tax credits and grants (320,150) (788,827) (1,420,286) (5,359,387)
Depreciation and amortization
Property, plant and equipment 535,739 356,113 1,364,924 953,826
Intangible assets and goodwill 110,142 116,857 313,781 281,225
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29,935,502 22,592,977 87,159,465 35,224,321
OPERATING LOSS (5,528,757) (4,454,793) (13,963,837) (11,651,234)
INTEREST INCOME 1,020,716 640,758 2,345,291 2,696,919
INTEREST EXPENSE (322,393) (162,051) (841,418) (598,884)
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LOSS BEFORE THE FOLLOWING ITEMS (4,830,434) (3,976,086) (12,459,964) (9,553,199)
INCOME TAX EXPENSE (947,858) (281,837) (3,086,171) (281,837)
GAIN ON DILUTION 424,751 - 424,751 10,223,567
NON-CONTROLLING INTEREST (868,540) (750,535) (2,650,839) (1,100,768)
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NET LOSS FOR THE PERIOD $(6,222,081) $(5,008,458) $(17,772,223) $(712,237)
=====================================================================================================================
BASIC AND DILUTED NET LOSS PER SHARE $ (0.15) $ (0.16) $ (0.46) $ (0.02)
=====================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 40,452,019 30,978,986 38,552,019 30,454,781
=====================================================================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(expressed in Canadian dollars)
NINE MONTHS ENDED SEPTEMBER 30,
UNAUDITED 2002 2001
------------------------------------------------------------------------------
BALANCE - BEGINNING OF PERIOD $19,082,451 $15,613,749
Net loss for the period 17,772,223 712,237
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BALANCE - END OF PERIOD $36,854,674 $16,325,986
==============================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
AETERNA LABORATORIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(expressed in Canadian dollars)
QUARTERS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
UNAUDITED 2002 2001 2002 2001
------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (6,222,081) $ (5,008,458) $(17,772,223) $ (712,237)
Items not affecting cash and cash equivalents
Depreciation and amortization 645,881 472,970 1,678,705 1,235,051
Interest expense - - 436,833
Future income taxes 139,164 (99,810) 1,312,837 (305,347)
Employee future benefits 505 - 17,757 -
Gain on dilution (424,751) - (424,751) (10,223,567)
Non-controlling interest 868,540 750,535 2,650,839 1,100,768
Stock-based compensation - - 53,516 -
Change in non-cash operating working capital items
Accounts receivable 407,417 2,805,942 (3,868,674) 821,896
Income taxes recoverable 294,076 - 199,157 -
Research and development tax credits recoverable (300,000) (322,500) (1,000,000) (1,182,392)
Inventory (1,395,805) 1,926,211 (795,144) 1,632,738
Prepaid expenses 306,982 124,940 (236,590) (389,023)
Accounts payable and accrued liabilities 1,029,509 (4,252,837) 854,235 (4,156,408)
Income taxes 285,609 15,462 580,271 (588,665)
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(4,364,954) (3,587,545) (16,750,065) (12,330,353)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (46,381) (95,000) (942,331) (313,953)
Issuance of warrants - - 746,667 -
Issuance of share capital, net of related expenses (186,464) 14,252,121 54,677,504 15,459,934
Issuance of share capital by the subsidiary 2,000,004 - 2,000,004 -
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1,767,159 14,157,121 56,481,844 15,145,981
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CASH FLOWS FROM INVESTING ACTIVITIES
Change in short-term investments (6,816,990) 4,209,564 (19,318,749) 29,840,064
Purchase of shares of subsidiary less cash acquired (31,171) (13,474,739) (1,347,567) (13,474,739)
Purchase of a product line (26,490) - (212,134) -
Purchase of property, plant and equipment (1,082,412) (88,371) (3,978,245) (386,599)
Additions to intangible assets and goodwill (138,943) (151,480) (267,645) (281,556)
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(8,096,006) (9,505,026) (25,124,340) 15,697,170
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NET CHANGE IN CASH AND CASH EQUIVALENTS (10,693,801) 1,064,550 14,607,439 18,512,798
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 398,148 931,550 697,901 931,550
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 37,594,495 24,708,830 11,993,502 7,260,582
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 27,298,842 $ 26,704,930 $ 27,298,842 $ 26,704,930
==============================================================================================================================
ADDITIONAL INFORMATION
Interest paid $ 56,232 $ 86,419 $ 159,675 $ 86,419
==============================================================================================================================
Income taxes paid $ 1,043,311 $ 413,794 $ 1,291,878 $ 1,136,294
==============================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
AETERNA LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(expressed in Canadian dollars)
UNAUDITED
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1 BASIS OF PRESENTATION
These interim financial statements as at September 30, 2002 and for the periods
ended September 30, 2001 and 2002, are unaudited. They have been prepared by the
Company in accordance with Canadian generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations and
cash flows for these periods have been included.
The accounting policies and methods of computation adopted in these financial
statements are the same as those used in the preparation of the Company's most
recent annual consolidated financial statements. All disclosures required for
annual financial statements have not been included in these financial
statements. These consolidated financial statements should be read in
conjunction with the Company's most recent annual consolidated financial
statements. These interim results of operations are not necessarily indicative
of the results for the full year.
2 NEW ACCOUNTING STANDARDS
The Company adopted on January 1st, 2002, section 3062 issued by the CICA
"Goodwill and Other Intangible Assets". This section broadens criteria for
recording intangible assets separately from goodwill. Section 3062 requires the
use of a non- amortization approach to account for purchased goodwill and
indefinite-lived intangibles. Under the non-amortization approach, goodwill and
indefinite-lived intangibles will not be amortized, but instead would be
reviewed annually for impairment, and writedowns are charged to earnings in the
period in which the recorded value of goodwill and indefinite-lived intangibles
exceeds their fair value. The amortization of the goodwill for the nine months
ended September 30, 2001 amounted to approximately $ 66,000.
The Company also adopted on January 1st, 2002, section 3870 issued by the CICA
"Stock-Based Compensation and Other Stock-Based Payments". The new section
applies to awards granted on or after the date of adoption, and requires that
stock-based payment to non-employees be accounted for using a fair value-based
method. For awards to employees, the CICA recommends their accounting using a
fair value-based method without rendering it mandatory. The Company not having
adopted this method is nevertheless required to make pro-forma disclosures of
net earnings (loss), basic net earnings (loss) per share and diluted net
earnings (loss) per share as if the fair value based method of accounting had
been applied. The adoption of this standard does not have a significant impact
on the Company's financial statements and that is why the pro-forma information
is not provided.
AETERNA LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(expressed in Canadian dollars)
UNAUDITED
-------------------------------------------------------------------------------
3 ACQUISITION OF A COMPANY
On May 1st, 2002, Unipex Finance S.A., a subsidiary of Atrium Biotechnologies
Inc., acquired 100 % of the issued and outstanding common shares of ADF Chimie
S.A. for a total consideration of $2,986,493. ADF Chimie S.A. is a distributor
of active and specialty ingredients for the cosmetics industry. The results of
operations have been consolidated from the date of acquisition and the fair
value of net assets is as follows:
Current assets $ 1,880,533
Property, plant and equipment 7,139
Current liabilities (665,172)
-------------------------------------------------------------------
Net identifiable assets 1,222,500
Goodwill 1,763,993
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Purchase price 2,986,493
Less: Cash and cash equivalents acquired (548,106)
Balance of purchase price (1,121,991)
-------------------------------------------------------------------
Cash paid $ 1,316,396
===================================================================
The goodwill is not deductible for income tax purposes over the following years.
4 SEGMENT INFORMATION
The Company manages its business and evaluates performance based on three
operating segments, which are the biopharmaceutical segment, the cosmetics and
nutrition segment and the distribution segment. The accounting principles used
for these three segments are consistent with those used in the preparation of
these consolidated financial statements.
QUARTERS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
UNAUDITED 2002 2001 2002 2001
------------------------------------------------------------------------------------------------------------------------------
REVENUES
Cosmetics and nutrition $ 3,127,871 $ 2,583,644 $ 9,283,436 $ 8,018,547
Distribution 21,333,640 15,734,809 64,039,065 15,734,809
Biopharmaceutical - - - -
Consolidated adjustments (54,766) (180,269) (126,873) (180,269)
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$24,406,745 $18,138,184 $ 73,195,628 $23,573,087
==============================================================================================================================
NET EARNINGS (LOSS) FOR THE PERIOD
Cosmetics and nutrition $ 631,076 $ 705,059 $ 2,012,942 $ 3,257,137
Distribution 382,829 214,704 1,172,006 214,704
Biopharmaceutical (7,230,300) (5,928,221) (20,978,596) (4,184,078)
Consolidated adjustments (5,686) - 21,425 -
------------------------------------------------------------------------------------------------------------------------------
$(6,222,081) $(5,008,458) $(17,772,223) $ (712,237)
==============================================================================================================================
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AETERNA LABORATORIES INC.
Date: November 20, 2002 By: /s/ Claude Vadboncoeur
------------------ ----------------------------------
Claude Vadboncoeur
Vice President, Legal Affairs and
Corporate Secretary