National Editor

Finishing up the merger disclosed at the end of last year with Zentaris AG, AEterna Laboratories Inc. entered into a convertible term loan facility for C$25 million (US$16.98 million) with two investors.

"We closed yesterday, it's all in the bank account," Dennis Turpin, chief financial officer of Quebec City, Quebec-based AEterna, said Tuesday.

The investors are SGF Sante Inc., a subsidiary of Societe generale de financement du Quebec, and Solidarity Fund QFL, also of Quebec, each putting C$12.5 million into the agreement, which matures on March 31, 2006, and bears an annual interest rate of 12 percent, payable once per year.

AEterna has the right to defer payment of interest until the March 31 date. SGF and Solidarity, for their parts, have the option to convert all or any part of the loan (plus accrued and unpaid interest) into subordinate voting shares of AEterna at a price of C$5.05 per share - a 25 percent premium to the 10-day, weighted average trading price ending March 28, 2003.

Along with the loan facility, AEterna completed the merger of its subsidiaries AEterna GmbH and Zentaris AG, thus completing the integration of Zentaris AG, of Frankfurt, Germany, which was acquired in December 2002. (See BioWorld Today, Jan. 2, 2003.)

AEterna has settled the balance of the purchase price for Zentaris AG of C$40 million to Degussa AG, of Dusseldorf, Germany.

Gilles Gagnon, AEterna's president and CEO, said "the biggest news is the ongoing successful integration of Zentaris. We've appointed some key people at the corporate level," he added, noting that the financing puts AEterna "on the safe side, planning to have enough cash in our entity."

The deal, which creates a company called Zentaris GmbH, gives AEterna 11 products ranging from preclinical to approved, as well as several pharmaceutical partners. The marketed product is the injectable gonadotropin-releasing hormone antagonist Cetrotide (cetrorelix acetate) for in vitro fertilization. The drug is being studied in several Phase II trials for other indications.

AEterna also owns 61.8 percent of Atrium Biotechnologies Inc., also of Quebec City, which develops and markets nutritional supplements, along with active ingredients and fine chemicals intended for the cosmetics, nutrition and other industries.

Focused on cancer and endocrinology, AEterna also provided updates on events during the last three months, since the buyout of Zentaris. Those include a deal with China-based Hainan Tianwang International Pharmaceutical Co. for manufacturing and marketing the cancer drug Lobaplatin there, which meant a cash payment to AEterna of C$4.5 million.

There was also an agreement with Baxter Healthcare Corp., of Deerfield, Ill., granting the latter exclusive worldwide rights to the cancer drug D-63153. The deal brings undisclosed payments, Baxter accepting 100 percent of clinical development costs, and milestone payments.

AEterna also signed an exclusive distribution and marketing agreement with German Remedies Ltd., a unit of the Zydus Cadila Group, of Ahmedabad, India, for marketing Impavido (miltefosine) for leismaniasis in India and Bangladesh, and another deal with LG Life Sciences Ltd., an affiliate of the South Korean conglomerate LG, for marketing Neovastat, AEterna's naturally occurring compound derived from cartilage, in Korean territory.

"The next major milestone is the unblinding of the Phase III kidney cancer trial [with Neovastat]," Gagnon told BioWorld Today. "We hope to be in a position to file for approval by year-end, and to launch in the second quarter of 2004."

Zentaris reported more than $30 million in revenue for 2002 and a positive cash flow. AEterna, with the loan agreement and settlement of the Zentaris purchase price, has C$50 million in cash.

AEterna also said 2 million warrants issued to SGF and the 1.6 million warrants to Solidarity Fund - which were issued last year in connection with a $57 million private placement of subordinate voting shares - expired March 31 of this year in accordance with the terms and have been canceled. SGF and Solidarity Fund still own 2 million and 1.6 million warrants, respectively, which may be exercised on or before Dec. 31 of this year at $20 per subordinate voting share.

AEterna's stock (NASDAQ:AELA) closed Tuesday at $2.45, down 20 cents.