6-K 1 a2032118z6-k.txt FORM 6-K Message to Shareholders Dear Shareholders: AEterna finished the third quarter with continued progress in meeting our business and clinical development goals for the year. Our financial position is strong, with healthy investment and a sound foundation. We are moving forward with encouraging progress in the steady advancement of Neovastat, AEterna's angiogenesis inhibitor. What is more, we anticipate further developments in the fourth quarter to meet our goals for the entire year. Additional shares issued; Atrium shares acquired AEterna issued additional shares for gross proceeds of $2.1 million from the exercise of an over-allotment option of the underwriters from the previous bought deal on May 8, 2000. In addition, SGF Soquia Inc., Fonds de solidarite FTQ and Fonds d'investissement bioalimentaire, acquired an additional 1,000,000 common shares in Atrium Biotechnologies Inc., for a cash consideration of $10 million. AEterna maintains its position as a majority shareholder of Atrium with 77.8% of the voting rights and 64% in share capital. Applications filed for additional Neovastat trial Subsequent to the end of the quarter, AEterna submitted applications to begin a pivotal Phase II clinical trial of Neovastat in patients with multiple myeloma. The study, which will involve approximately 20 sites in North America and Europe, was designed to obtain accelerated approval of Neovastat if results are conclusive. About 120 patients will be included in the study with final results of the trial expected by the summer of 2002. This is the third pivotal clinical trial in oncology initiated by AEterna this year. As we announced in the second quarter, patient recruitment is underway for Phase III clinical trials for the treatment of lung and kidney cancer. Gilles Gagnon named to Business Development position During the quarter we made an important addition to our organization with the appointment of Mr. Gilles Gagnon as Vice President of Business Development. Mr. Gagnon brings more than 20 years of experience in the pharmaceutical and healthcare industries to his position at AEterna. He will be an integral part of our team working to make strategic alliances, one of our key objectives for the year. Financial results Sales of Atrium Biotechnologies increased 17% to $2 million for the quarter ended September 30, 2000, up from $1.7 million for the same period last year. Consolidated net earnings for the quarter were $2.2 million ($0.07 per share), compared to a net loss of $1.7 million ($0.07 per share) for the same period last year. This was mainly a result of a gain on dilution of $4.3 million. The gain resulted from the second investment of $10 million by SGF Soquia Inc., Fonds de solidarite FTQ and Fonds d'investissement bioalimentaire, in exchange for an additional 14% equity in Atrium Biotechnologies Inc. Research and development expenses were $5.2 million in the quarter, compared to $2.9 million for the same period last year. The increase is attributable to the costs associated with the two ongoing Phase III clinical trials in lung and kidney cancer. Research and development tax credits and grants were $1.6 million compared to $0.2 million for the same period a year ago. This increase is due to contributions obtained from the Canadian federal government's Technology Partnerships Canada (TPC) program. The Company's consolidated financial position remains strong with $71.3 million in cash and short-term investments at the end of the third quarter, which includes $23.6 million in Atrium. AEterna also has access to a Technology Partnerships Canada (TPC) contribution of up to $22.5 million, as well as an indirect contribution from the U.S. National Cancer Institute (NCI) of approximately $5 million. Outlook As we enter the last quarter of 2000, we are pleased with our progress this year in pursuing our focus on oncology and advancing the development of Neovastat in key clinical trials. At the same time, we remain committed to further pursuit of our strategic goals of forging strategic alliances and broadening our product pipeline through an acquisition. I look forward to reporting to you on our continued progress in our next quarterly report. Dr. Eric Dupont President and Chief Executive Officer November 9, 2000 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 AS AT SEPTEMBER 30, 2000 AND 1999 (expressed in Canadian dollars)

UNAUDITED 2000 1999 ------------------------------------------------------------------------------------------------- $ $ ASSETS CURRENT ASSETS Cash and cash equivalents 26,005,522 1,029,786 Short-term investments 45,324,722 22,975,552 Accounts receivable 5,106,426 2,197,499 Research and development tax credits recoverable 744,932 980,427 Inventory 1,757,257 1,066,791 Prepaid expenses 669,794 200,339 ------------------------------------------------------------------------------------------------- 79,608,653 28,450,394 CAPITAL ASSETS 15,001,769 15,423,737 OTHER ASSETS 1,238,612 1,162,191 ------------------------------------------------------------------------------------------------- 95,849,034 45,036,322 ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities 3,781,833 3,062,052 LONG-TERM DEBT 4,000,000 3,348,814 Non-controlling interest (note 1) 9,235,241 - ------------------------------------------------------------------------------------------------- 17,017,074 6,410,866 ------------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY SHARE CAPITAL 79,785,107 46,291,868 DEFICIT (953,147) (7,666,412) ------------------------------------------------------------------------------------------------- 78,831,960 38,625,456 ------------------------------------------------------------------------------------------------- 95,849,034 45,036,322 ------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------

AETERNA LABORATORIES INC. CONSOLIDATED STATEMENTS OF EARNINGS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 (expressed in Canadian dollars)

QUARTERS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30 UNAUDITED 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------------------------------ $ $ $ $ REVENUES 2,036,342 1,740,503 6,074,014 4,506,731 ------------------------------------------------------------------------------------------------------------------------ OPERATING EXPENSES Cost of goods sold 285,626 208,728 804,554 862,500 Selling and administrative 584,247 503,296 1,537,154 1,672,918 Research and development 5,196,106 2,859,621 15,529,338 8,555,589 Research and development tax credits and grants (1,604,743) (237,247) (4,751,426) (873,295) Depreciation and amortization Capital assets 290,328 278,150 859,875 711,150 Other assets 39,302 25,545 115,426 100,360 ------------------------------------------------------------------------------------------------------------------------ 4,790,866 3,638,093 14,094,921 11,029,222 ------------------------------------------------------------------------------------------------------------------------ OPERATING LOSS (2,754,524) (1,897,590) (8,020,907) (6,522,491) INTEREST INCOME 1,113,595 187,534 2,583,411 872,204 ------------------------------------------------------------------------------------------------------------------------ LOSS BEFORE THE FOLLOWING (1,640,929) (1,710,056) (5,437,496) (5,650,287) GAIN ON DILUTION (NOTE 1) 4,295,276 -- 11,673,094 -- ------------------------------------------------------------------------------------------------------------------------ 2,654,347 (1,710,056) 6,235,598 (5,650,287) NON-CONTROLLING INTEREST (417,538) -- (995,560) -- ------------------------------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) FOR THE PERIOD 2,236,809 (1,710,056) 5,240,038 (5,650,287) ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) PER SHARE Basic 0.07 (0.07) 0.18 (0.22) ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ Fully diluted 0.07 (0.07) 0.16 (0.22) ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 29,321,420 25,272,766 ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF DEFICIT FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 (expressed in Canadian dollars)

NINE MONTHS ENDED SEPTEMBER 30 UNAUDITED 2000 1999 ------------------------------------------------------------------------------------------------------------------------ $ $ DEFICIT - BEGINNING OF PERIOD (5,955,956) (2,016,125) Net earnings (loss) for the period 5,240,038 (5,650,287) Subsidiary share issue expenses (237,229) - ------------------------------------------------------------------------------------------------------------------------ DEFICIT - END OF PERIOD (953,147) (7,666,412) ------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------

AETERNA LABORATORIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 (expressed in Canadian dollars)

Nine months ended September 30 Unaudited 2000 1999 ------------------------------------------------------------------------------------------------------------ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) for the period 5,240,038 (5,650,287) Items not affecting cash Depreciation and amortization 975,301 811,510 Gain on dilution (11,673,094) -- Non-controlling interest 995,560 -- Change in non-cash operating working capital items Accounts receivable (1,575,782) 1,084,248 Research and development tax credits recoverable (89,932) 119,703 Inventory (588,291) 353,069 Prepaid expenses (395,333) (74,247) Accounts payable and accrued liabilities 1,256,517 (401,606) ------------------------------------------------------------------------------------------------------------ (5,855,016) (3,757,610) ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Increase in long-term debt 95,186 2,927,990 Issuance of share capital, net of related expenses 19,432,201 127,975 Issuance of share capital by the subsidiary to non-controlling interest, net of related expenses (note 1) 19,675,546 -- ------------------------------------------------------------------------------------------------------------ 39,202,933 3,055,965 ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments (12,668,873) 7,277,495 Purchase of capital assets (534,644) (6,918,434) Increase in other assets (164,611) (146,583) ------------------------------------------------------------------------------------------------------------ (13,368,128) 212,478 ------------------------------------------------------------------------------------------------------------ NET CHANGE IN CASH AND CASH EQUIVALENTS 19,979,789 (489,167) ------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 6,025,733 1,518,953 ------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS - END OF PERIOD 26,005,522 1,029,786 ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ ADDITIONAL INFORMATION Interest paid -- -- ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ Income taxes paid -- -- ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------

AETERNA LABORATORIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999 (expressed in Canadian dollars) UNAUDITED 1 NEW SUBSIDIARY, ATRIUM BIOTECHNOLOGIES INC. On January 21, 2000, the company transferred to its newly created subsidiary, Atrium Biotechnologies Inc., its cosmetics and nutrition business. The net carrying value of the assets transferred amounted to $1,800,000. Moreover, two private investments were made during the period. On January 21 and September 19, 2000, Atrium Biotechnologies inc. issued shares to third parties for total cash consideration of $20,000,000, thus decreasing the company's interest to 77.8% and 63.6% respectively. These two private investments resulted in a gain on dilution of $11,673,094. 2 SEGMENT INFORMATION

Quarters ended September 30 Nine months ended September 30 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ $ $ $ $ REVENUES Cosmetics and nutrition 2,036,342 1,740,503 6,074,014 4,506,731 Biopharmaceutical - - - - ------------------------------------------------------------------------------------------------ 2,036,342 1,740,503 6,074,014 4,506,731 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) Cosmetics and nutrition 904,012 944,741 2,927,347 1,631,151 Biopharmaceutical 1,332,797 (2,654,797) 2,312,691 (7,281,438) ------------------------------------------------------------------------------------------------ 2,236,809 (1,710,056) 5,240,038 (5,650,287) ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ SEGMENT ASSETS Cosmetics and nutrition 26,029,590 1,990,963 Biopharmaceutical 69,819,444 43,045,359 ---------------------------------------------- 95,849,034 45,036,322 ---------------------------------------------- ----------------------------------------------