FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
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Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August 2002
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-_____
EXHIBIT INDEX
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Exhibit Description Page
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1. AEterna's Interim Report 2002 - Second Quarter (Q2) 1
Dear shareholders,
During the quarter, we reached many significant milestones. Consolidated sales
of our subsidiary Atrium registered a strong increase and net profit was up 54%
compared to the same period a year ago. Atrium also bought ADF Chimie S.A., its
second acquisition in Europe within a year. Furthermore, we completed a
successful private placement of $57 million with quality partners. Finally, the
Data Safety Monitoring Board (DSMB), an independent committee of experts,
confirmed Neovastat's safety profile and concluded that our current phase III
clinical studies in kidney and lung cancer could be pursued without any
adjustments. The phase III trial in kidney cancer could represent our first
opportunity to commercialize Neovastat.
SIGNIFICANT MILESTONES
ATRIUM RESULTS
During the second quarter, consolidated sales of AEterna's subsidiary, Atrium,
reached $23.4 million compared to $2.7 million for the same period of 2001. The
consolidated net earnings reached $1.66 million during the second quarter
compared to $1.08 million last year, an increase of 54%.
ACQUISITION OF ADF CHIMIE S.A. BY ATRIUM
Atrium acquired the privately-owned French company ADF Chimie S.A. for $3
million. ADF is a distributor of active and specialty ingredients for the French
cosmetic industry to some 50 clients, including L'Oreal, L.V.M.H. and Chanel.
PRIVATE PLACEMENT
On April 9, 2002, AEterna concluded a private placement of $57 million at a
price of $7.50 per share. SGF Sante and Solidarity Fund QFL acquired 7.3 million
subordinate voting shares, at a price of $7.50 per share, as well as 7.3 million
warrants exercisable at $13 and $20 per share maturing on March 31 and December
31, 2003, under certain conditions. Also, Acqua Wellington Private Placement
Fund, Ltd. acquired 266,667 subordinate voting shares, at a price of $7.50 per
share, as well as 133,333 warrants exercisable at $13 per share, maturing on
March 31, 2003.
NEOVASTAT'S FAVORABLE SAFETY PROFILE CONFIRMED
Independent oncology and statistical experts from the Data Safety Monitoring
Board (DSMB) confirmed Neovastat's favourable safety profile.
SCIENTIFIC ARTICLES
CLINICAL CANCER RESEARCH recently published an article on the biological
activities linked to Neovastat's inhibition of the Vascular Endothelial Growth
Factor (VEGF), while MOLECULAR CANCER THERAPEUTICS will shortly publish an
article on Neovastat's proven ability to induce apoptosis of endothelial cells.
These two peer reviews are published by the American Association for Cancer
Research (AACR), one of the most prominent cancer research organizations in the
United States.
OUTLOOK
These developments give us continued confidence to pursue our phase III trials
with Neovastat for its eventual commercialization, and to maintain our growth
objectives according to the strategy already in place.
Dr. Eric Dupont
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 six-month
period ended June 30, 2002 and 2001. 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 $23.4 million, compared to $2.7
million for the corresponding quarter last year. For the six-month period ended
June 30, 2002, the consolidated revenues were $48.8 million compared to $5.4
million in 2001. This increase for the quarter as well as for the first half of
the year can be primarily attributed to the 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 $17.8 million compared to $0.4
million for the same quarter in 2001. For the six-month period ended June 30,
2002, the cost of sales has gone up from $0.9 million to $37.5 million, an
increase of $36.6 million. These costs are in direct proportion to corresponding
revenues and the percentage of these costs against revenues has varied
significantly as a result of the acquisition of Unipex.
Selling and administrative expenses amounted to $2.4 million during this quarter
compared to $0.9 million in 2001. Regarding the six-month period, selling and
administrative expenses were $4.7 million compared to $1.7 million in 2001. The
acquisition of Unipex explains these variations compared to last year.
R&D investments amounted to $7.7 million during this quarter in comparison with
$6.7 million last year. For the six-month period ended June 30, 2002, R&D
investments reached $15.1 million in comparison to $13.9 million in 2001. This
increase in expenses 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 $0.6 million for this quarter compared with
$2.6 million in 2001. The decrease in the eligible expenses of current grant
programs explains this situation. As of June 30, 2002, R&D tax credits and
grants totalled $1.1 million compared to $4.6 million for the same period last
year.
Interest income was $0.8 million for the three-month period ended June 30, 2002
in comparison with $1 million for the same period last year. For the cumulative
period of six months, interest income reached $1.3 million, compared to $2.1
million for the same period in 2001. Cash used in R&D investments as well as for
the Unipex' acquisition explains the decrease of interest income for the
six-month period ended June 30, 2002.
The income tax expense for this first six-month period comes from Atrium and its
subsidiaries. No income tax expense was recorded for the corresponding period
last year.
The loss before the gain on dilution for this second quarter amounted to $5.9
million or 15 cents per share compared to a loss before the gain on dilution of
$2.7 million or 9 cents per share for the same quarter in 2001. For the
six-month period ended June 30, 2002, the loss before the gain on dilution
increased by $5.7 million and has gone up from $5.9 million to $11.6 million.
The increase of the loss before the gain on dilution for this quarter as well as
for the six-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 June 30, 2002 remains strong with $92.2
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 this second
quarter strengthens the growth objectives of the Company.
During this period of six months, an amount of $12.4 million was used in
operating activities while $54.7 million was provided through financing
activities mainly by the private placement. Regarding investment activities,
$12.5 million was invested in short-term investments whereas acquisition of
long-lived assets amounted to $4.5 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 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
JUNE 30, DECEMBER 31,
2002 2001
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(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 37,594,495 $ 11,993,502
Short-term investments 54,572,735 42,070,976
Accounts receivable 30,060,778 23,361,630
Income taxes recoverable 249,760 154,684
Research and development tax credits recoverable 2,100,139 1,295,000
Inventory 8,119,562 8,303,697
Prepaid expenses 1,721,281 1,161,587
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134,418,750 88,341,076
PROPERTY, PLANT AND EQUIPMENT 17,538,180 15,403,984
INTANGIBLE ASSETS AND GOODWILL 26,703,484 24,252,487
FUTURE INCOME TAX ASSETS 5,182,171 6,354,170
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$183,842,585 $134,351,717
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LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 25,045,577 $ 23,429,717
Income taxes 312,111 -
Current portion of long-term debt 2,893,312 3,447,688
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28,251,000 26,877,405
LONG-TERM DEBT 12,054,194 10,400,969
EMPLOYEE FUTURE BENEFITS 140,659 115,952
NON-CONTROLLING INTEREST 20,487,172 18,338,602
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60,933,025 55,732,928
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SHAREHOLDERS' EQUITY
SHARE CAPITAL 152,323,666 97,513,214
CONTRIBUTED SURPLUS 853,699 -
DEFICIT (30,632,593) (19,082,451)
CUMULATIVE TRANSLATION ADJUSTMENT 364,788 188,026
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122,909,560 78,618,789
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$183,842,585 $134,351,717
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE PERIODS ENDED JUNE 30, 2002 AND 2001
(expressed in Canadian dollars)
QUARTERS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
UNAUDITED 2002 2001 2002 2001
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REVENUES $23,440,112 $2,668,278 $48,788,883 $5,434,903
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OPERATING EXPENSES
Cost of sales 17,803,052 411,613 37,485,846 855,266
Selling and administrative 2,424,247 861,010 4,673,627 1,694,658
Research and development costs 7,688,457 6,675,681 15,131,802 13,889,899
Research and development tax credits and grants (603,055) (2,528,560) (1,100,136) (4,570,560)
Depreciation and amortization
Property, plant and equipment 497,455 305,897 829,185 597,713
Intangible assets and goodwill 102,609 80,717 203,639 164,368
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27,912,765 5,806,358 57,223,963 12,631,344
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OPERATING LOSS (4,472,653) (3,138,080) (8,435,080) (7,196,441)
INTEREST INCOME 793,979 980,562 1,324,575 2,056,161
INTEREST EXPENSE (336,269) (174,733) (519,025) (436,833)
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LOSS BEFORE THE FOLLOWING ITEMS (4,014,943) (2,332,251) (7,629,530) (5,577,113)
INCOME TAX EXPENSE (973,577) - (2,138,313) -
GAIN ON DILUTION - 10,223,567 - 10,223,567
NON-CONTROLLING INTEREST (910,217) (350,233) (1,782,299) (350,233)
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NET EARNINGS (LOSS) FOR THE PERIOD $(5,898,737) $7,541,083 $(11,550,142) $4,296,221
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BASIC AND DILUTED NET EARNINGS (LOSS) PER SHARE $ (0.15) $ 0.25 $ (0.30) $ 0.14
======================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 40,452,019 30,271,295 38,552,019 30,192,678
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CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE PERIODS ENDED JUNE 30, 2002 AND 2001
(expressed in Canadian dollars)
SIX MONTHS ENDED
JUNE 30,
UNAUDITED 2002 2001
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BALANCE - BEGINNING OF PERIOD $(19,082,451) $(15,613,749)
Net earnings (loss) for the period (11,550,142) 4,296,221
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BALANCE - END OF PERIOD $(30,632,593) $(11,317,528)
========================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 2002 AND 2001
(expressed in Canadian dollars)
QUARTERS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
UNAUDITED 2002 2001 2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) for the period $(5,898,737) $7,541,083 $(11,550,142) $4,296,221
Items not affecting cash and cash equivalents
Depreciation and amortization 600,064 386,614 1,032,824 762,081
Interest expense - 174,733 - 436,833
Future income taxes 469,204 (138,162) 1,173,673 (205,537)
Employee future benefits 180 - 17,252 -
Gain on dilution - (10,223,567) - (10,223,567)
Non-controlling interest 910,217 350,233 1,782,299 350,233
Stock-based compensation 53,516 - 53,516 -
Change in non-cash operating working capital items
Accounts receivable 3,178,002 60,659 (4,276,091) (1,984,046)
Income taxes recoverable (250,221) - (94,919) -
Research and development tax credits recoverable (300,000) (581,892) (700,000) (859,892)
Inventory (655,077) (223,758) 600,661 (293,473)
Prepaid expenses (85,195) 46,431 (543,572) (513,963)
Accounts payable and accrued liabilities (2,983,521) 457,293 (175,274) 96,429
Income taxes 177,783 (71,127) 294,662 (604,127)
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(4,783,785) (2,221,460) (12,385,111) (8,742,808)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt - (96,000) (895,950) (218,953)
Issuance of warrants 746,667 - 746,667 -
Issuance of share capital, net of related expenses 54,803,518 768,581 54,863,968 1,207,813
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55,550,185 672,581 54,714,685 988,860
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CASH FLOWS FROM INVESTING ACTIVITIES
Change in short-term investments (20,522,026) 17,841,802 (12,501,759) 25,630,500
Purchase of shares of subsidiary less cash acquired (1,316,396) - (1,316,396) -
Purchase of a product line (185,644) - (185,644) -
Purchase of property, plant and equipment (1,499,998) (178,256) (2,895,833) (298,228)
Additions to intangible assets and goodwill (41,400) (19,064) (128,702) (130,076)
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(23,565,464) 17,644,482 (17,028,334) 25,202,196
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NET CHANGE IN CASH AND CASH EQUIVALENTS 27,200,936 16,095,603 25,301,240 17,448,248
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 422,648 - 299,753 -
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 9,970,911 8,613,227 11,993,502 7,260,582
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CASH AND CASH EQUIVALENTS - END OF PERIOD $37,594,495 $24,708,830 $37,594,495 $24,708,830
==========================================================================================================
ADDITIONAL INFORMATION
Interest paid $ 50,287 $ - $ 103,443 $ -
==========================================================================================================
Income taxes paid $ 46,836 $ 122,125 $ 248,567 $ 722,500
==========================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS
AETERNA LABORATORIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 2002 AND 2001
(expressed in Canadian dollars)
UNAUDITED
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1 BASIS OF PRESENTATION
These interim financial statements as at June 30, 2002 and for the periods ended
June 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 six months
ended June 30, 2001 amounted to approximately $44,000.
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 JUNE 30, 2002 AND 2001
(expressed in Canadian dollars)
UNAUDITED
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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)
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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)
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Cash paid $1,316,396
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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 JUNE 30, SIX MONTHS ENDED JUNE 30,
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2002 2001 2002 2001
=========================== =============================
REVENUES
Cosmetics and nutrition $ 2,972,232 $ 2,668,278 $ 6,155,565 $ 5,434,903
Distribution 20,539,987 - 42,705,425 -
Biopharmaceutical - - - -
Consolidated adjustments (72,107) - (72,107) -
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$23,440,112 $ 2,668,278 $48,788,883 $ 5,434,903
====================================================================================================
NET EARNINGS (LOSS) FOR THE PERIOD
Cosmetics and nutrition $ 589,323 $ 1,134,022 $ 1,381,866 $ 2,552,078
Distribution 459,561 - 789,177 -
Biopharmaceutical (6,955,335) 6,407,061 (13,748,296) 1,744,143
Consolidated adjustments 7,714 - 27,111 -
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$(5,898,737) $ 7,541,083 $(11,550,142) $ 4,296,221
====================================================================================================
SIGNATURE
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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: August 21, 2002 By: /s/ Claude Vadboncoeur
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Claude Vadboncoeur
Vice President, Legal Affairs and
Corporate Secretary