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 April 2003
AETERNA LABORATORIES INC.
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(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
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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
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If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
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DOCUMENTS INDEX
DOCUMENTS DESCRIPTION
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1. AEterna's Interim Report 2003 - First Quarter (Q1)
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MESSAGE TO SHAREHOLDERS
Dear Shareholders:
With the recent acquisition of our new German subsidiary, Zentaris, we have
reached an important crossroad in our corporate development. Zentaris has
enabled us to diversify our product portfolio and to welcome qualified
scientists and seasoned management personnel to our highly experienced team.
With the arrival of Dr. Jurgen Engel as Executive Vice President, R&D, and Chief
Operating Officer, we are able to benefit from his vast international experience
of more than 25 years in oncology and endocrinology. Dr. Engel has directed
numerous research projects in the development of pharmaceutical products, and
has succeeded in leading a number of them through the full cycle, obtaining
regulatory approval and bringing them to the marketplace.
Our revenues for this quarter rose by more than 60%. This increase comes mainly
from our biopharmaceutical segment which reflects our ability to quickly and
successfully integrate our new subsidiary Zentaris, acquired last December only.
We are benefiting from our expanded portfolio which is generating significant
revenues from both new strategic partnerships, as well as sales of Cetrotide(R)
for IN VITRO fertilization. At the clinical level, our ongoing Neovastat Phase
III trial in kidney cancer will be completed in the months ahead and positive
results could translate into a major breakthrough for AEterna as the first
company to market an angiogenesis inhibitor for the treatment of cancer.
This first quarter has also allowed us to close convertible term loans of $25
million with two strategic long-time partners and to settle the $40 million
balance of purchase price of Zentaris with Degussa AG. AEterna has a solid
financial position with more than $52 million in cash.
HIGHLIGHTS
- Consolidated revenues for the first quarter ended March 31, 2003 were $40.8
million with a net loss of $4.8 million, or $0.12 per share, compared to
revenues of $25.3 million, and a net loss of $5.7 million, or $0.17 per
share, for the same period in 2002. Increased revenues from Zentaris
products and continued growth from the other subsidiary, Atrium,
contributed to the decrease of loss per share.
- Agreement for marketing Neovastat in Korea with LG Life Sciences. The
agreement provides AEterna with upfront and milestone payments, as well as
a return on manufacturing and sales of Neovastat. This partnership also
extends AEterna's coverage for Neovastat to 50% of the oncology world
market and allows the Company to surpass the $50 million mark in milestone
payments.
- Agreement with German Remedies Limited to sell Impavido(R), the first oral
treatment for black fever, in India and Bangladesh.
- Significant milestone payment from Baxter Healthcare S.A. for D-63153 for
prostate cancer.
CORPORATE GOVERNANCE
Gilles Gagnon, President and Chief Operating Officer, was promoted President and
Chief Executive Officer of the Company, while Dr. Eric Dupont, remains the
Company's Executive Chairman of the Board, which now has six external and three
internal members.
OUTLOOK
The progress made during the past few months allows us to look towards the
remainder of the current year with enthusiasm. Our financial situation is solid,
integration of Zentaris is generating significant revenue, and the Phase III
clinical trial of Neovastat in kidney cancer, which will be completed in a few
months, might enable us to inaugurate a new class of drugs against cancer.
Everything appears to be ready to allow AEterna to position itself as an
international biopharmaceutical company in the development of innovative
therapies in oncology and endocrinology.
[SIGNATURE]
Gilles R. Gagnon, MSc, MBA
President 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. It provides an update to the
discussion and analysis contained in our Annual Report of 2002. This discussion
and analysis should be read in conjunction with the information contained in
AEterna Laboratories Inc.'s interim consolidated financial statements and
related notes for the three-month periods ended March 31, 2003 and 2002. All
figures are in Canadian dollars.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are disclosed in the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section and the
annual consolidated financial statements contained in our 2002 Annual Report.
Our financial statements are prepared in accordance with the Canadian Generally
Accepted Accounting Principles (GAAP) and access to a summary of differences
between Canadian and US GAAP is possible by consulting note 20 of our annual
2002 financial statements.
RESULTS OF OPERATIONS
REVENUES
Revenues for the three-month period ended March 31, 2003 were $40.8 million
compared to $25.3 million for the same period last year. This increase of $15.5
million or 61% comes mainly from the Biopharmaceutical segment with revenues
totalling $12.5 million. The balance of $3 million comes from the Cosmetics &
Nutrition (C&N) and the Distribution segments, representing an increase of 12%
compared to the first quarter of 2002.
The acquisition of Frankfurt-based Zentaris, in December 2002, provided all of
the revenues in the Biopharmaceutical segment for this first quarter. Revenues
in this segment were generated by marketing of Cetrotide(R), milestone payments,
research and development contract fees and the amortization of up-front
payments.
OPERATING EXPENSES
The cost of sales during this quarter amounted to $23.2 million compared to
$19.7 million for the same quarter in 2002. These costs are in direct proportion
to corresponding revenues and their percentage does not vary significantly from
last year's same quarter.
General, selling and administrative expenses amounted to $5.5 million during
this quarter compared to $3.9 million in 2002. This increase is attributed to
the Biopharmaceutical segment, for an amount of $1 million, as a result of the
acquisition of Zentaris made last December. In addition, the C&N and
Distribution segments increased their selling expenses by $0.6 million as a
result of the increase in their sales force.
Research and Development (R&D) investments, net of R&D tax credits and grants,
amounted to $10.9 million during this quarter in comparison with $5.3 million
last year. This increase is attributed to the acquisition of Zentaris, whereby
the investment in R&D amounted to $5.6 million for this quarter. Therefore, the
level of the investment for Neovastat, our lead antiangiogenic compound in
oncology, was approximately the same as last year since the Phase III program is
actively ongoing for renal cell carcinoma and non-small cell lung cancer. The
residual amount of investment in R&D mainly relates to Cetrorelix, our lead
compound in endocrinology, and to our recently acquired Zentaris drug discovery
unit, including a 100,000 proprietary compound library.
Depreciation and amortization amounted to $2.5 million compared to $0.4 million
for the same period in 2002. This significant increase is mainly related to the
additional amortization on Zentaris technologies acquired in December 2002. The
purchase price allocation will be completed during the next quarter and may
result in being allocated from identified intangible assets, among others, to
goodwill. We expect that the amortization expense for 2003 will increase
significantly over that of the 2002 fiscal year due to the intangible additions
incurred at the end of 2002.
The net loss for this quarter amounted to $4.8 million or $0.12 per share in
2003 compared to a net loss of $5.7 million or $0.17 per share for the same
quarter in 2002. This reduction is the result of new income from Zentaris within
our biopharmaceutical segment.
LIQUIDITY AND CAPITAL RESOURCES
The financial position of the Company remains strong with $52.4 million in cash
and short-term investments as at March 31, 2003. During this quarter, a
promissory note of $43 million was reimbursed, and a $25 million convertible
term loan facility was closed with two strategic long-time partners.
Furthermore, the Zentaris $40 million balance of purchase price was settled with
Degussa AG.
During this quarter, an amount of $5.9 million was used for operating
activities. Regarding the investment activities, the acquisition of a portion of
Unipex Finance S.A. and long-lived assets amounted to $2.6 million.
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 2002 Annual Report.
[SIGNATURE]
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.
INTERIM CONSOLIDATED BALANCE SHEETS
(expressed in thousands of Canadian dollars)
AS AT AS AT
MARCH 31, DECEMBER 31,
2003 2002
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(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 38,757 $ 12,494
Short-term investments 13,623 69,040
Accounts receivable 40,572 74,840
Inventory 15,627 16,335
Prepaid expenses and deferred charges 3,099 2,041
Future income tax assets 320 1,682
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111,998 176,432
PROPERTY, PLANT AND EQUIPMENT 21,035 21,688
DEFERRED CHARGES 1,253 1,047
INTANGIBLE ASSETS 88,849 90,300
GOODWILL 25,258 24,252
FUTURE INCOME TAX ASSETS 15,930 17,249
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$ 264,323 $ 330,968
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LIABILITIES
CURRENT LIABILITIES
Promissory note $ - $ 43,000
Accounts payable and accrued liabilities 41,389 42,557
Income taxes 3,431 3,783
Balance of purchase price - 39,690
Current portion of long-term debt 3,096 3,202
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47,916 132,232
DEFERRED REVENUES 11,700 12,438
CONVERTIBLE TERM LOANS 18,675 -
LONG-TERM DEBT 9,743 9,969
EMPLOYEE FUTURE BENEFITS 6,131 6,042
FUTURE INCOME TAX LIABILITIES 34,521 35,275
NON-CONTROLLING INTEREST 24,024 24,676
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152,710 220,632
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SHAREHOLDERS' EQUITY
SHARE CAPITAL 153,527 153,578
CONTRIBUTED SURPLUS 7,179 854
DEFICIT (49,698) (44,864)
CUMULATIVE TRANSLATION ADJUSTMENT 605 768
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111,613 110,336
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$ 264,323 $ 330,968
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED MARCH 31, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
QUARTERS ENDED MARCH 31,
UNAUDITED 2003 2002
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REVENUES
Sales $ 29,978 $ 25,349
License income and research contract fees 10,835 -
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40,813 25,349
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OPERATING EXPENSES
Cost of sales 23,220 19,683
General, selling and administrative 5,469 3,914
R&D costs, net of tax credits and grants 10,886 5,281
Depreciation and amortization
Property, plant and equipment 860 332
Intangible assets 1,643 101
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42,078 29,311
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OPERATING LOSS (1,265) (3,962)
Interest income 937 470
Interest and financial expenses (793) (136)
Foreign exchange (loss) gain (387) 14
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LOSS BEFORE THE FOLLOWING (1,508) (3,614)
INCOME TAX EXPENSE (2,501) (1,165)
NON-CONTROLLING INTEREST (825) (872)
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NET LOSS FOR THE PERIOD $ (4,834) $ (5,651)
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BASIC AND DILUTED NET LOSS PER SHARE $ (0.12) $ (0.17)
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 40,693,527 32,851,019
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INTERIM CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE PERIODS ENDED MARCH 31, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
QUARTERS ENDED MARCH 31,
UNAUDITED 2003 2002
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BALANCE - BEGINNING OF PERIOD $ 44,864 $ 19,082
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Net loss for the period 4,834 5,651
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BALANCE - END OF PERIOD $ 49,698 $ 24,733
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED MARCH 31, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
QUARTERS ENDED MARCH 31,
UNAUDITED 2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (4,834) $ (5,651)
Items not affecting cash and cash equivalents
Depreciation and amortization 2,503 433
Future income taxes 1,869 704
Deferred charges 95 -
Deferred revenues (167) -
Employee future benefits 94 17
Non-controlling interest 825 872
Change in non-cash operating working capital items
Accounts receivable (4,544) (7,854)
Inventory 446 1,256
Prepaid expenses (1,364) (458)
Accounts payable and accrued liabilities (534) 2,808
Income taxes (334) 272
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(5,945) (7,601)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of promissory note (43,000) -
Convertible term loans 25,000 -
Payment of balance of purchase price (2,358) -
Repayment of long-term debt (30) (896)
Issuance of share capital, net of related expenses (51) 60
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(20,439) (836)
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CASH FLOWS FROM INVESTING ACTIVITIES
Change in short-term investments 55,418 8,020
Business acquisition (note 2) (2,339) -
Purchase of property, plant and equipment (250) (1,396)
Additions to intangible assets (52) (87)
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52,777 6,537
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NET CHANGE IN CASH AND CASH EQUIVALENTS 26,393 (1,900)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (130) (123)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 12,494 11,994
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 38,757 $ 9,971
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ADDITIONAL INFORMATION
Interest paid $ 121 53
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Income taxes paid $ 1,159 202
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
UNAUDITED
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1 BASIS OF PRESENTATION
These unaudited interim financial statements as at March 31, 2003 and for the
periods ended March 31, 2003 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 BUSINESS ACQUISITION
On January 13, 2003, the subsidiary Atrium Biotechnologies Inc. acquired 20,000
common shares of the outstanding capital stock of Unipex Finance S.A.,
increasing its interest in the latter to 76.11% (70.28% in 2002) for a cash
consideration of $2,338,955. The excess of the purchase price over the net
identifiable assets on the date of acquisition is $1,810,612 and is recorded as
goodwill not deductible for income tax purposes.
3 COMPANY'S STOCK OPTION PLAN
The company has chosen not to use the fair value method to account for
stock-based compensation costs arising from awards to employees but discloses
the pro-forma information relating to net loss and loss per share as if the fair
value method of accounting had been used.
Three months ended
March 31, 2003
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Net loss for the period $ (4,834)
Pro-forma adjustment for stock-based compensation costs (564)
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Pro-forma net loss for the period (5,398)
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Basic and diluted net loss per share $ (0.12)
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Pro-forma basic and diluted net loss per share $ (0.13)
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The pro-forma amounts may not be representation of future disclosure as the
estimated fair value of stock options is amortized to expense over the vesting
period and additional options may be granted in future periods. Furthermore,
these pro-forma amounts include a compensation cost based on a weighted-average
grant date fair value of $2.12 per stock option for 299,251 stock options
granted during the period as calculated using the Black-Scholes option pricing
model with the following assumptions: a risk-free interest rate of 3.98 %,
dividends of nil, an expected volatility of 57 % and an expected life of 3.8
years.
4 CONVERTIBLE TERM LOANS
The company issued convertible term loans in the aggregate principal amount of
$25 million, bearing interest at an annual rate of 12%, payable annually or at
maturity at the option of the company. These term loans are secured by all
assets of the company with the exception of equipments and the shares of Atrium
Biotechnologie Inc. The term loans mature on March 31, 2006 and are convertible
at all time at the option of the holders in subordinate voting shares of the
AETERNA LABORATORIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
UNAUDITED
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company at a price of $ 5.05 per share. The equity component, which corresponds
to the option of the holders to convert term loans into shares of the company,
was valued at the date of the loans and is classified as contributed surplus.
AETERNA LABORATORIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 2003 AND 2002
(expressed in thousands of Canadian dollars, except share and per share data)
UNAUDITED
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5 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 MARCH 31
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2003 2002
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REVENUES
Biopharmaceutical $ 12,545 $ -
Cosmetics and nutrition 3,681 3,183
Distribution 25,199 22,166
Consolidated adjustments (612) -
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$ 40,813 $ 25,349
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NET EARNINGS (LOSS) FOR THE PERIOD
Biopharmaceutical $ (5,837) $ (6,793)
Cosmetics and nutrition 749 793
Distribution 401 330
Consolidated adjustments (147) 19
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$ (4,834) $ (5,651)
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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: APRIL 30, 2003 By: /S/CLAUDE VADBONCOEUR
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Claude Vadboncoeur
Vice President, Legal Affairs and
Corporate Secretary