EX-99.2 3 ex99-2.htm EX-99.2

 

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Introduction

 

This Management’s Discussion and Analysis (“MD&A”) provides a review of the results of operations, financial condition and cash flows of COSCIENS Biopharma Inc. (formerly Aeterna Zentaris Inc.) for the three months ended March 31, 2025. In this MD&A, “COSCIENS”, the “Company”, “we”, “us” and “our” mean COSCIENS Biopharma Inc. and its subsidiaries. This discussion should be read in conjunction with the information contained in the Company’s unaudited interim condensed consolidated financial statements (the “interim consolidated financial statements”) and the notes thereto as of March 31, 2025 and December 31, 2024, and for the three months ended March 31, 2025 and 2024. Our unaudited interim consolidated financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

 

The Company’s common shares are listed on both The Nasdaq Capital Market (“Nasdaq”) and on the Toronto Stock Exchange (“TSX”) under the symbol “CSCI”.

 

All amounts in this MD&A are presented in thousands of United States (“U.S.”) dollars, except for share and per share data, or as otherwise noted. This MD&A was approved by the Company’s Board of Directors (the “Board”) on May 13, 2025. This MD&A is dated May 13, 2025.

 

About Forward-Looking Statements

 

Certain statements in this MD&A, referred to herein as “forward-looking statements”, constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, as amended, and “forward-looking information” under the provisions of Canadian securities laws. All statements, other than statements of historical fact, that address circumstances, events, activities, or developments that could or may or will occur are forward-looking statements. When used in this MD&A, words such as “anticipate”, “assume”, “believe”, “could”, “expect”, “forecast”, “future”, “goal”, “guidance”, “intend”, “likely”, “may”, “would” or the negative or comparable terminology as well as terms usually used in the future and the conditional are generally intended to identify forward-looking statements, although not all forward-looking statements include such words.

 

Forward-looking statements are based on the opinions and estimates of the Company as of the date of this MD&A, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including but not limited to the factors described in “Risk Factors and Uncertainties” and those relating to: the Company’s patented technologies and value-driving products, and development thereof; the extraction, production and commercialization of active ingredients from natural sources and our ability to successfully market related products; the successful development and marketing of our oat-based pipeline products, including oat-beta glucan, avenanthramides and beta glucan from yeast, as well as such products’ capability to address unmet needs within the nutraceuticals markets; Macrilen® (macimorelin) and the Company’s plans in respect of same, including commercialization and clinical programs as well as in respect of the top line data from the DETECT-trial; the Company’s business strategy; the strategic decision to sunset the Company’s Amyotrophic Lateral Sclerosis (ALS), AIM Biologicals and Delayed Clearance Parathyroid Hormone (DC-PTH) programs; the Company’s positioning in its target markets; potential impacts of changes to the Company’s executive leadership; the transition to a new presidential administration in the United States, including the potential use and effects of tariffs to address the administration’s policy goals, could materially impact our costs and revenues, as well as the macroeconomic framework in which we operate; the Company’s ability to accelerate the scale-up of PGX Technology towards commercial levels; expectations for completion of the Company’s Edmonton facility and Natex Termitz facility; pre-clinical and clinical studies and trials and their expected timing and results, including the potential to bring certain products to market following such studies and trials; the ability of our pharmaceutical therapeutic assets to address unmet medical needs across a number of indications; management’s assumptions, estimates and judgements; liquidity and capital resources; adequacy of our financial resources to finance operations and expenditure requirements; limitations on internal controls over financial reporting and our ability to address identified material weaknesses; and the plans, objectives, future outlook and financial position of the Company in general.

 

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Forward-looking statements involve known and unknown risks and uncertainties, and other factors which may cause the actual results, performance or achievements stated herein to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such risks and uncertainties include, among others: the Company’s present and future business strategies; operations and performance within expected ranges; anticipated future cash flows; local and global economic conditions and the environment in which the Company operates; the transition to a new presidential administration in the United States, including the potential use and effects of tariffs to address the administration’s policy goals, could materially impact our costs and revenues, as well as the macroeconomic framework in which we operate; anticipated capital and operating costs; uncertainty in our revenue generation from our marketed products; product development and related clinical trials and validation studies; results from our products under development may not be successful or may not support advancing the product; the failure of the DETECT-trial to achieve its primary endpoint in Childhood Onset Growth Hormone Deficiency (“CGHD”) may impact the market for macimorelin (Macrilen®; Ghryvelin®) in adult hormone growth deficiency (“AGHD”) and the existing relationships we have for that product; ability to raise capital and obtain financing to continue our currently planned operations; the impacts of the sunsetting of our ALS, DC-PTH and AIM Biologicals programs; our ability to accelerate the scale up of our PGX Technology to commercial levels; our now heavy dependence on sales by and revenue from our main distributor of our legacy Ceapro products and its customers, the continued availability of funds and resources to successfully commercialize our products; the ability to secure strategic partners for late stage development, marketing, and distribution of our products; our ability to enter into out-licensing, development, manufacturing, marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect; our ability to protect and enforce our patent portfolio and intellectual property; and our ability to continue to list our common shares on the NASDAQ Capital Market (“NASDAQ”) or the Toronto Stock Exchange (“TSX”).

 

These risk factors are not intended to represent a complete list of the risk factors that could affect the Company. These factors and assumptions, however, should be considered carefully. More detailed information about these and other factors is included under “Risk Factors” in the Annual Report on Form 20-F and in other documents incorporated herein by reference.

 

However, we advise you to review any further disclosures we make on related subjects in our reports on Form 6-K filed or furnished to the SEC and in our other public disclosure filed under our profile on SEDAR+ at www.sedarplus.ca.

 

Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Many of these factors are beyond our control. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements, particularly in light of any resulting impacts on the global economy and on the Company’s business. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements contained herein, except as required by applicable securities laws. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors, or to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

 

About Material Information

 

This MD&A includes information that we believe to be material to investors after considering all circumstances. We consider information and disclosures to be material if they result in, or would reasonably be expected to result in, a significant change in the market price or value of our securities, or where it is likely that a reasonable investor would consider the information and disclosures to be important in making an investment decision.

 

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We are a reporting issuer under the securities legislation of all of the provinces of Canada, and our securities are registered with the U.S. Securities and Exchange Commission (“SEC”). We are therefore required to file or furnish continuous disclosure information, such as interim and annual financial statements, management’s discussion and analysis, proxy or information circulars, annual reports on Form 20-F, material change reports and press releases with the appropriate securities regulatory authorities. Additional information about the Company and copies of these documents may be obtained free of charge upon request from our Corporate Secretary or on the Internet at the following addresses: www.cosciensbio.com, www.sedarplus.ca and www.sec.gov.

 

Company Overview

 

COSCIENS Biopharma Inc. (together with its subsidiaries, the “Company”), formerly Aeterna Zentaris Inc., is a Life Science company developing and commercializing a diversified portfolio of products for the cosmeceutical, nutraceutical and pharmaceutical markets. These products are produced using the Company’s proprietary technologies. The Company’s patented technologies include the Pressurized Gas eXpanded (PGX) technology, which is a unique technology that generates high-value yields of active ingredients from natural based resources for use in novel cosmeceutical, nutraceutical and pharmaceutical products. The Company’s two value-driving products, oat beta glucan and avenanthramides, are found in many household name cosmetic and personal care brands. These products are manufactured from the Company’s proprietary oat extraction manufacturing technology and are known for their well-documented health benefits.

 

Plan of Arrangement

 

On December 14, 2023, Aeterna Zentaris Inc. (“Aeterna”) and Ceapro Inc. (“Ceapro”) entered into a binding arrangement agreement pursuant to which Aeterna would acquire all of the issued and outstanding common shares of Ceapro (the “Transaction”) by way of a plan of arrangement. The Transaction was consummated on June 3, 2024.

 

Following the closing of the Transaction, former shareholders of Ceapro owned approximately 50% of the Aeterna common shares on a fully diluted basis and former shareholders of Aeterna owned approximately 50% of the Aeterna common shares on a fully diluted basis. For financial reporting and accounting purposes, Ceapro is the acquirer of Aeterna in the Transaction. The condensed interim consolidated financial statements of COSCIENS Biopharma Inc. as of March 31, 2025 and December 31, 2024 and for the three months ended March 31, 2025 and 2024 reflect the results of operations and financial position of Ceapro for the periods presented and includes the results of operations of Aeterna subsequent to the Transaction, which was completed on June 3, 2024.

 

Effective June 30, 2024, Ceapro has changed its reporting currency from Canadian dollars to U.S. dollars. This change in reporting currency has been applied retrospectively such that all amounts in the consolidated financial statements of the Company and the accompanying notes thereto are expressed in U.S. dollars. References to “$” are U.S. dollars and references to “CA $” are to Canadian dollars. For comparative purposes, historical consolidated financial statements of Ceapro were recast in U.S. dollars by translating assets and liabilities at the closing exchange rate in effect at the end of the respective period, revenues, expenses and cash flows at the average exchange rate in effect for the respective period and equity transactions at historical exchange rates. Translation gains and losses are included in the cumulative foreign currency translation adjustment, which is reported as a component of shareholders’ equity under accumulated other comprehensive loss.

 

Management Succession Plan

 

On April 14, 2025, the Company announced the appointment of Anna Biehn as its new Chief Executive Officer, with her role commencing effective May 5, 2025. Ms. Biehn brings over 25 years of global general management and marketing experience across the consumer products and biosciences industries. The outgoing CEO, Gilles Gagnon has transitioned to a role as a special consultant to the CEO to support a smooth leadership transition.

 

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Key Operational Developments

 

Active ingredients

 

The Company’s active ingredient segment focuses on leveraging our unique expertise in the extraction, production and commercialization of active ingredients from natural sources. The Company’s commercialized products are well positioned in the cosmeceutical market and mostly focused on the documented health benefits of two bio actives extracted from oats; beta glucan and avenanthramides. These products include:

 

●A commercial line of natural active ingredients, including beta glucan, avenanthramides (colloidal oat extract), oat powder, oat oil, and oat peptides, which are marketed to the personal care, cosmetic, medical, and animal health industries through our distribution partners and direct sales;

 

●A commercial line of natural anti-aging skincare products, utilizing active ingredients including oat beta glucan and avenanthramides, which are marketed to the cosmeceuticals market through our wholly owned subsidiary, JuventeDC Inc.; and

 

●Veterinary therapeutic products, including an oat shampoo, an ear cleanser, and a dermal complex/conditioner, which are manufactured and marketed to veterinarians in Japan and Asia.

 

 

The Company’s core technologies used to extract and process bio actives include proprietary Ethanol Fractionation Processes (EFP) and Pressurized Gas eXpanded (PGX) Technology. EFP is mostly used to produce liquid formulations while PGX is used for powder formulations. PGX is a patented, unique and disruptive technology with several key advantages over conventional drying and purification technologies that can be used to process biopolymers into high-value and novel biocomposites. In a single step and using green solvents, it has the ability to generate purified highly porous polymer composites such as aerogels which cannot be made using conventional drying technologies. In 2023, the Company commenced a collaboration with Austria-based NATEX Prozesstechnologie GesmbH to accelerate the scale-up of PGX Technology at both its Edmonton facility and at the Natex Termitz facility. Construction of the PGX unit in Edmonton was completed in Q4, 2024, and both units are expected to be fully operational by the end of 2025.

 

Given the well-known properties of oat beta glucan and avenanthramides as cholesterol reducer and anti-inflammation respectively, we are actively developing our oat-based pipeline products to address unmet needs within the nutraceuticals markets, with a strategic focus on:

 

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Oat Beta Glucan – Chewable for cholesterol reduction

 

Leveraging approved claims for the use of oat beta glucan as a proven cholesterol reduction ingredient in Canada, the United States of America and the European Union, the Company has formulated a healthy edible product capable of delivering the appropriate dose of oat beta glucan to meet all regulatory and health requirements. Commercial manufacturing samples have been produced, proving manufacturability of a healthy and delicious edible product containing the high levels of oat beta glucan required to provide a scientifically proven cholesterol reduction in humans. The Company intends to bring this product to the wellness and functional food market B2C via various e-commerce platforms by the end of 2025.

 

Avenanthramides – nutraceutical-chewable formulation to reduce inflammation

 

In addition to cosmetic applications, avenanthramides, when taken orally, could treat inflammation-based conditions such as exercise induced inflammation, joint inflammation as well as inflammation at the gastro-intestinal and cardiovascular levels.

 

Through the use of a unique chromatography purification technology, the Company has successfully developed a highly purified and well characterized pharmaceutical grade powder formulation with the goal that such active pharmaceutical ingredient (API) could be offered as both nutraceutical and pharmaceutical formulations.

 

The Company’s initial activities for use of avenanthramides in nutraceuticals were focused on assessing the bio-availability and bio-efficacy of the compound under the leadership of Dr. Li Li Ji at the University of Minnesota. Following the completion of the bio-availablity study in 2018, the Company successfully completed two bio-efficacy studies in 2019 using low and high doses of avenanthramides with young men and women demonstrating in a statistically significant manner the efficacy of avenanthramides in alleviating exercise-induced inflammation as evidenced by a significant decrease of inflammation biomarkers in the blood. These studies paved the way for the development of products like superfine oat flour enriched with Avenanthramides used for the production of nutraceuticals as well as for the development of a pharmaceutical grade tablet for clinical trials. The Company is initiating the production of enriched oat flour at small commercial scale at the Edmonton facility.

 

Beta glucan from yeast (YBG)- nutraceutical-capsule as an immune booster

 

While yeast beta glucan is a commercial product with well-known immune properties, the obtention of a consistently high-purity product represents a major challenge for suppliers. Using the PGX technology, the Company has successfully processed several formulations of yeast beta glucan that should enable the offer of a very high purity YBG product with very well-defined specifications. The Company further demonstrated the mechanism of action following in vitro and in vivo studies.

 

Powder formulation produced in Edmonton, using the 50-litre PGX technology, will be offered in capsules as an immune booster product.

 

Pharmaceutical

 

The Company is also dedicated to the development of its pharmaceutical therapeutic assets and has established a clinical and pre-clinical development pipeline to potentially address unmet medical needs across a number of indications.

 

During the third quarter of 2024, the Company made a strategic decision to discontinue its AIM Biological, Amyotrophic Lateral Sclerosis (ALS), and Delayed Clearance Parathyroid Hormone programs. This decision was influenced by several factors, including increasingly challenging timelines and costs associated with reaching the next value inflection point in pre-clinical development.

 

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On August 27, 2024, the Company announced that the Phase 3 DETECT-trial evaluating macimorelin for the diagnosis of Childhood Onset Growth Hormone Deficiency (CGHD) had failed to meet its primary endpoints according to the definitions in the study protocol. Based on the results of the study, we are prioritizing our pipeline moving forward and repositioning the Company as a pure play Life Science’s business offering natural-based products. Therefore, while macimorelin for the diagnosis of Adult Growth Hormone Deficiency is still on the market, the Company has decided to not make any future investments in macimorelin for the diagnosis of CGHD and is exploring and validating several options for its commercialization with adults, including the potential to divest this asset.

 

Macimorelin Commercialization Program

 

Macrilen® (macimorelin), is the first and only U.S. Food and Drug Administration (“FDA”) and European Medicines Agency (“EMA”) approved oral test indicated for the diagnosis of patients with AGHD. Macimorelin is currently marketed under the tradename Ghryvelin® in the European Economic Area and the United Kingdom through an exclusive licensing agreement with Pharmanovia. To date the product has launched in the United Kingdom, Sweden, Denmark, Finland, Germany, Netherlands and Austria.

 

Avenanthramides for Potential Applications in Inflammation Based Diseases

 

Avenanthramides have garnered significant interest due to their suggested bioactivities, including potent antioxidant and anti-inflammatory effects both in vitro and in vivo. In November 2023, the Company initiated a Phase 1 safety study evaluating its flagship product, avenanthramides, for potential applications in managing conditions related to inflammation. The Phase 1-2a study (“AvenActive”) is a double-blind, placebo-controlled, randomized, adaptive, first-in-human study designed to assess safety, tolerability, and pharmacokinetics of single and multiple ascending oral doses of avenanthramide. 72 healthy subjects have completed the Phase 1 portion of the trial which included 48 healthy subjects in a single ascending dose (SAD) arm and 24 healthy subjects in a multiple ascending dose (MAD) arm .

 

Subjects received doses ranging from 30mg to 960mg per group per day. Given that no significant adverse reactions have been observed during SAD and MAD phases, The Data Safety and Monitoring Board recommended to start the Phase 2a with patients suffering from mild inflammation. A total of 20 patients will be enrolled in the Phase 2a portion which is designed to gather initial insights into its potential efficacy. As the trial progresses, the Company remains focused on collaborating with regulatory authorities, healthcare professionals, and patient communities to bring this innovation to market.

 

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Consolidated Statements of Loss and Comprehensive Loss Data

 

(in thousands of US dollars, except loss per share)  Three months ended 
   March 31, 
   2025   2024 
   $   $ 
Revenues   1,500    2,057 
Cost of sales   (1,057)   (1,153)
Gross profit   443    904 
           
Research and development   (1,134)   (1,062)
Selling, general and administrative   (2,926)   (1,656)
Loss from operations   (3,617)   (1,814)
           
Other income (loss)   (38)   1 
           
(Loss) income before income taxes   (3,655)   (1,813)
           
Income tax recovery   -    412 
Net loss   (3,655)   (1,401)
           
Other comprehensive loss:          
Items that may be reclassified subsequently to profit or loss:          
Foreign currency translation adjustments   (496)   (456)
Items that will not be reclassified subsequently to profit or loss:          
Actuarial gain on defined benefit plans   1,110    - 
Comprehensive loss   (3,041)   (1,857)
           
Basic loss per share   1.16    0.76 
           
Weighted average number of shares outstanding (basic)   3,144,682    1,847,718 

  

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Revenue and cost of sales

 

The following table summarizes our gross margin earned during the periods indicated:

 

(in thousands of US dollars, except percentages)  Three months ended March 31, 
   2025   2024   Change   Change 
   $   $   $   % 
Revenue                    
Active ingredients   1,387    2,057    (670)   (33%)
Pharmaceutical   113    -    113    100%
Total revenue   1,500    2,057    (557)   (27%)
Cost of sales                    
Active ingredients   (1,018)   (1,153)   135    12%
Pharmaceutical   (39)   -    (39)   (100%)
Total cost of sales   (1,057)   (1,153)   96    8%
Gross Margin   443    904    (461)   (51%)
Gross Margin %   30%   44%          

 

Our total revenue for the three-month period ended March 31, 2025, was $1.5 million as compared to $2.1 million for the same period in 2024, a decrease of $0.6 million. This decrease was primarily due to a decrease of $0.7 million in sales of Avenanthramides, Beta Glucan and Oat Oil from prior period, offset by $0.1 million in Macrilen revenue due to the acquisition of Aeterna as described in the plan of arrangement section above. Cost of sales for the three-month period ended March 31, 2025, decreased by $0.1 million, primarily due to the lower sales volumes during the period. The gross margin for the three-month period ended March 31, 2025, was $0.4 million as compared to $0.9 million for the same period in 2024, a decrease of $0.5 million, in line with the movements in revenue.

 

Research and development expenses

 

The following table summarizes our research and development expenses incurred during the periods indicated:

 

(in thousands of US dollars, except percentages)  Three months ended March 31, 
   2025   2024   Change   Change 
   $   $   $   % 
Direct research and development expenses:                    
Avenanthramides for inflammation-based diseases   311    750    (439)   (59%)
Macimorelin pediatric DETECT-trial   300    -    300    100%
Other programs   95    87    15    19%
Sub total   706    837    (124)   (15%)
Employee-related expenses   391    225    166    74%
Facilities, depreciation, and other expenses   37    -    30    429%
Total   1,134    1,062    72    7%

 

Our total research and development expenses were consistent quarter over quarter with an increase of $0.1 million related to timing.

 

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Selling, general and administrative expenses

 

The following table summarizes our Selling, general and administrative expenses incurred during the period indicated:

 

(in thousands of US dollars, except percentages)  Three months ended March 31, 
   2025   2024   Change   Change 
   $   $   $   % 
Selling, general and administrative expenses:                    
Salaries & benefits   1,259    363    896    246%
Insurance   289    34    255    750%
Professional fees   561    844    (283)   (34%)
Other office & general expenses   817    415    402    97%
Total selling, general and administrative expenses   2,926    1,656    1,270    77%

 

Our total selling, general and administrative expenses for the three-month period ended March 31, 2025, were $2.9 million as compared to $1.7 million for the same period in 2024, an increase of $1.2 million. This was primarily attributable to the acquisition of Aeterna as described in the plan of arrangement section above and resulted with:

 

●An increase in Salaries & benefits of $0.9 million;
●An increase in Insurance costs $0.2 million; and
●An increase in office & general expenses of $0.4 million; offset by
●A decrease in professional fees of $0.3 million primarily due to the additional legal costs in 2024 related to the transaction

 

Net loss

 

For the three-month period ended March 31, 2025, we reported a consolidated net loss of $3.7 million, or $1.16 loss per common share, as compared with a consolidated net loss of $1.3 million, or $0.76 loss per common share for the same period in 2024. The $2.3 million increase in net loss is attributable to:

 

●a $0.5 million decrease in gross margin due to a $0.6 million decrease in revenues offset by lower cost of sales of $0.1 million;
●an increase in operating expenses of $1.4 million due primarily to the acquisition of Aeterna; and
●a decrease in income tax recovery of $0.4 million

 

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Selected quarterly financial data

 

   Three months ended 
(in thousands of US dollars, except for per share data)  March 31, 2025  

December 31,

2024

  

September 30,

2024

  

June 30,

2024

 
       $   $   $ 
Revenues   1,500    3,322    1,871    2,337 
Net loss   (3,655)   (6,731)   (5,755)   (1,422)
Net loss per share (basic and diluted) (1)   (1.16)   (2.15)   (1.85)   (0.64)

 

   Three months ended 
(in thousands of US dollars, except for per share data) 

March 31,

2024

  

December 31,

2023

  

September 30,

2023

  

June 30,

2023

 
   $   $   $   $ 
Revenues   2,057    1,213    1,952    1,392 
Net loss   (1,401)   (1,565)   (776)   (860)
Net loss per share (basic and diluted) (1)   (0.76)   (0.85)   (0.42)   (0.47)

 

(1)Net loss per share is based on the weighted average number of shares outstanding during each reporting period, which may differ on a quarter-to-quarter basis. As such, the sum of the quarterly net loss per share amounts may not equal full-year net loss per share.

 

Historical quarterly results of operations and net loss cannot be taken as reflective of recurring revenue or expenditure patterns of predictable trends, largely given the non-recurring nature of certain components of our revenues, unpredictable quarterly variations in net finance income and of foreign exchange gains and losses. Historical quarterly sales and results primarily fluctuate due to variations in the timing of customer orders of different product mixes, and changes in the optimal use of our capacity to manufacture products.

 

Consolidated Statements of Financial Position Data

 

(in thousands of US dollars) 

March 31,

2025

  

December 31,

2024

 
   $   $ 
Cash and cash equivalents   13,758    16,393 
Trade and other receivables and other assets   4,141    4,897 
Inventory   2,455    2,691 
Restricted cash equivalents   128    123 
Property, equipment and intangible assets   10,659    10,966 
Total assets   31,141    35,070 
Payables, accrued liabilities and income taxes payable   4,820    4,835 
Current portion of provisions   240    385 
Current portion of deferred revenues   122    120 
Lease liabilities   2,226    2,310 
Warrant and DSU liabilities   1,624    1,611 
Non-financial non-current liabilities (1)   11,965    12,648 
Total liabilities   20,997    21,909 
Shareholders’ equity   10,144    13,161 
Total liabilities and shareholders’ equity   31,141    35,070 

 

(1) Comprised mainly of employee future benefits and non-current portion of deferred revenues.

  

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Liquidity and capital resources

 

The Company’s objective in managing capital, consisting of shareholders’ equity, with cash and cash equivalents and restricted cash equivalents being its primary components, is to ensure sufficient liquidity to finance its manufacturing operations, R&D costs, selling, general and administrative expenses and working capital requirements. Historically, the Company has raised capital via public and private equity offerings and issuances as its primary source of liquidity. The capital management objective of the Company remains the same as that in previous periods. The policy on dividends is to retain cash to keep funds available to finance the activities required to advance the Company’s product development portfolio and to pursue appropriate commercial opportunities as they may arise. The Company is not subject to any capital requirements imposed by any regulators or by any other external source.

 

Cash flows

 

The following table shows a summary of our consolidated cash flows for the periods indicated:

 

(in thousands of US dollars)  Three months ended 
   March 31, 
   2025   2024 
   $   $ 
Cash and cash equivalents – Beginning of period   16,393    6,678 
Net cash used in operating activities   (1,880)   (2,380)
Net cash used in financing activities   (200)   (94)
Net cash used in investing activities   (615)   (564)
Effect of exchange rate changes on cash & cash equivalents   60    (134)
Cash and cash equivalents – End of period   13,758    3,506 

 

Operating Activities

 

Cash used by operating activities was $1.9 million for the three-month period ended March 31, 2025, as compared to $2.4 million in the same period in 2024. This $0.5 million decrease in operating cash outflows is attributed primarily to:

 

●a $0.5 million decrease in gross margin; and
●an increase in operating costs of $1.4 million; offset by
●a $1.4 million increase in changes in operating assets and liabilities from the previous period due primarily to the acquisition of Aeterna.

 

Investing activities

 

Cash used in investing activities totaled $0.6 million for the three-month period ended March 31, 2025, as compared to $0.6 million in the same period in 2024, remaining consistent quarter over quarter.

 

Financing activities

 

Cash used in financing activities totaled $0.2 million for the three-month period ended March 31, 2025, as compared to $0.1 million for the three-month period ended March 31, 2024. This $0.1 million increase in cash flows used in financing activities is primarily related to additional payments of lease liabilities.

 

Capital Stock

 

As of May 12, 2025, we had 3,146,772 common shares issued and outstanding, as well as, 114,556 stock options, 64,750 deferred share units and 661,987 warrants outstanding. Each stock option, deferred share unit and warrant is exercisable for one common share.

 

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Adequacy of financial resources

 

As of March 31, 2025, the Company had an accumulated deficit of $14.7 million and a net loss of $3.7 million resulting in negative cash flows from operations of $1.9 million for the three-month period ended March 31, 2025. We believe that our existing cash on hand will be sufficient to fund our anticipated operating and capital expenditure requirements for at least the next 12 months. We plan to finance our future operations and capital expenditures primarily through products sales and cash on hand. We also believe that our existing cash on hand will be sufficient to fund our anticipated operating and capital expenditure requirements beyond the next 12 months and through to June 2026. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. We may also require additional capital to pursue in-licenses or acquisitions of other product candidates.

 

Our forecast of the period through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially as a result of a number of factors. Our future capital requirements are difficult to forecast and will depend on many factors, including:

 

●the terms and timing of any other collaboration, licensing, and other arrangements that we may establish;
●the initiation, progress, timing, and completion of preclinical studies and clinical trials for our current and future potential product candidates, as well as other research and development programs;
●our alignment with health authorities on regulatory approval requirements;
●the number and characteristics of product candidates that we pursue;
●the outcome, timing, and cost of regulatory approvals;
●delays that may be caused by changing regulatory requirements;
●the cost and timing of hiring new employees to support our continued growth and potential expense associated with any loss of key personnel;
●the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
●the costs of filing and prosecuting intellectual property rights and enforcing and defending any intellectual property-related claims;
●the costs associated with any potential late receipt or non-receipt of trade and other receivables;
●the potential costs associated with foreign currency fluctuations or changing interest rates;
●our ability to expand our customer base and related demand fluctuations;
●the costs associated with any potential interruption or quality impacts on raw material supplies;
●the transition to a new presidential administration in the United States, including the potential use and effects of tariffs to address the administration’s policy goals, could materially impact the macroeconomic framework in which we operate.
●the costs of responding to and defending ourselves against complaints and potential litigation;
●the costs and timing of procuring clinical and commercial supplies for our product candidates; and
●the extent to which we acquire or in-license other product candidates and technologies.

 

Contractual obligations and commitments as of March 31, 2025

 

Significant expenditure contracted for at the end of the reporting period but not recognized as liabilities is as follows:

 

(in thousands of US dollars)  TOTAL 
   $ 
Less than 1 year   525 
1 - 5 years   - 
    525 

 

The Company previously entered into license agreements with Agriculture Canada (AG) for a technology to increase the concentration of avenanthramides in selected oat and with University of Alberta for a Pressurized Gas eXpanded Technology (PGX) for the processing of various polymers. The royalty percentage rate would be 2% strictly for sales made from avenanthramides produced from the AG technology while royalty percentage rates would range between 1.0% to 3.5% for sales made from products manufactured using the PGX Technology, the rate being according to the classification of the resulting product (cosmeceutical, nutraceutical, pharmaceutical).

 

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Contingencies

  

From time to time, the Company may be a party to litigation and subject to claims incidental to its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these matters will not have a material adverse effect on its business. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable, requiring recognition of a loss accrual, or whether the potential loss is reasonably possible, requiring potential disclosure.

 

Critical Accounting Estimates and Judgments

 

Critical accounting estimates and assumptions, as well as critical judgements used in applying accounting policies in the preparation of the Company’s condensed interim consolidated financial statements, were the same as those applied to Company’s annual consolidated financial statements as of and for the year ended December 31, 2024, except for those noted in note 2 of the interim condensed consolidated financial statements for the period ended March 31, 2025.

 

Financial Risk Factors and Other Financial Instruments

 

The nature and extent of our exposure to risks arising from financial instruments, including credit risk, liquidity risk and market risk and how we manage those risks are described in note 23 to our audited consolidated financial statements as of December 31, 2024.

 

Related Party Transactions

 

During the three-month period ended March 31, 2025, other than employment agreements and indemnification agreements with our management, there are no further related party transactions.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2025, we did not have any interests in special purpose entities or any other off-balance sheet arrangements.

 

Risk Factors and Uncertainties

 

An investment in our securities involves a high degree of risk. In addition to the other information included in this MD&A and in the related consolidated financial statements, investors are urged to carefully consider the risks described under the heading “Risk Factors” in the Annual Report on Form 20-F for the year ended December 31, 2024 and under the heading “Risks and Uncertainties”, for a discussion of the various risks that may materially affect our business. The risks and uncertainties not presently known to us or that we currently deem immaterial may also materially harm our business, operating results and financial condition and could result in a complete loss of your investment.

 

Our most recent Annual Report on Form 20-F was filed with the relevant Canadian securities’ regulatory authorities at www.sedarplus.ca and with the SEC at www.sec.gov, and investors are urged to consult such risk factors.

 

Disclosure Controls and Procedures

 

The Chief Executive Officer and the Chief Financial Officer of the Company are responsible for establishing and maintaining our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 and Canadian securities legislation).  Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

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The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as at March 31, 2025. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were not effective as of that date due to the material weaknesses in internal control over financial reporting disclosed in our Annual Report on Form 20-F for the year ended December 31, 2024 available on SEDAR+ at www.sedarplus.ca and on EDGAR at sec.gov and as described below.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. The Company’s internal control over financial reporting is a process designed under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2025, based on the criteria established in Internal Control – Integrated Framework: 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). Based on the results of that evaluation, our management concluded that, as of March 31, 2025, the Company’s internal control over financial reporting was not effective due to the identification of the material weaknesses disclosed in our Annual Report on Form 20-F for the year ended December 31, 2024, and described below.

 

Material Weaknesses

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

 

Our management concluded that material weaknesses existed as of the year ended December 31, 2024. Specifically, based on the criteria established by the COSO framework, our management identified deficiencies in the COSO framework principles associated with the control environment, control activities, information and communication and monitoring components of internal control, that constitute material weaknesses, either individually or in the aggregate.

 

The Company underwent a business combination on June 3, 2024 pursuant to which Aeterna combined with Ceapro in a plan of arrangement. As part of the integration of Aeterna and Ceapro, our management has put in place a process to standardize policies and procedures and harmonize controls across the Company in order to develop and operate effective internal control over financial reporting. As the harmonization of these controls remains in progress, the following material weaknesses were identified by management as of December 31, 2024:

 

Ineffective Control Environment: The Company did not maintain an effective control environment based on the criteria established in the COSO framework. The Company did not have sufficient competent personnel with the appropriate levels of knowledge, experience, and training in accounting and internal control over financial reporting. The material weakness in the control environment led to the additional material weaknesses detailed below.

 

Ineffective Control Activities: The Company did not maintain effective control activities based on the criteria established in the COSO framework. Specifically, these control deficiencies constitute material weaknesses, either individually or in the aggregate:

 

(a)Control activities were not designed, implemented or performed in a timely manner to support the operating effectiveness of the controls to prevent and detect potential material errors.

 

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(b)The Company lacked sufficient personnel with appropriate technical training in, and experience with, IFRS to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner, including in areas such as revenue recognition, inventory, fixed assets and impairment of assets.

 

(c)The Company did not have an adequate segregation of duties or appropriate level of review that is needed to comply with financial reporting requirements, including segregation of duties over the preparation, independent review, and recording of journal entries.

 

Ineffective Information and Communication: Management was unable to generate or provide adequate quality supporting information and communication based on the criteria established in the COSO framework. Management concluded that the Information Technology General Controls were not operating effectively, undermining the Information Technology environment’s capability to support the integrity of financial reporting, with deficiencies identified across all key Information Technology General Controls areas in scope.

 

Ineffective Monitoring Activities: The Company did not maintain effective monitoring activities based on the criteria established in the COSO framework. Management identified that the Company did not have in place adequate processes for oversight, accountability for performance of internal control over financial reporting responsibilities, and timely implementation of corrective activities, and therefore could not perform sufficient ongoing evaluations to ascertain whether the components of internal control were present and functioning.

 

Management’s Plan to Remediate the Material Weaknesses

 

We have developed and are in the process of implementing a remediation plan to address the material weaknesses discussed above and to improve our internal control over financial reporting. The remediation plan includes:

 

●We are evaluating our long-term resource needs and requirements to ensure we have adequate resources with the necessary technical knowledge, oversight and accountability to ensure there is adequate segregation of duties and to satisfy the Company’s internal control over financial reporting needs and requirements. We have also committed to providing the Company’s personnel with the necessary guidance and on-the-job training to effectively perform their responsibilities related to internal control over financial reporting.

 

●We will formalize the documentation of internal control over financial reporting at the Company to assist in assessing, implementing and maintaining an effective control environment, including: scoping and risk assessment; business process flows; risk control matrices; and the evaluation of the design and operating effectiveness of controls.

 

●We are implementing a formal monitoring program over our internal control framework that will more effectively identify, evaluate and remediate deficiencies than the current year and regularly report on progress of internal control remediation efforts to the audit committee during 2025.

 

●We will implement additional system capabilities and enhance existing controls that support management’s assertions with respect to the completeness, accuracy and validity of complex accounting transactions on a timely basis.

 

Although the documentation of internal control over financial reporting has been formalized, the material weaknesses will not be remediated until the necessary controls have been fully implemented and are operationally effective. As we finalize and implement the remediation plan outlined above, we may also identify additional measures to address the material weaknesses or modify certain of the remediation procedures described above. We also may implement additional changes to our internal control over financial reporting as may be appropriate in the course of remediating the material weakness. There can be no assurance that the measures we take in response to the material weaknesses described above will be sufficient to remediate such material weaknesses or to avoid potential future material weaknesses or significant deficiencies.

 

The material weaknesses will continue to be addressed through 2025.

 

Changes in Internal Control Over Financial Reporting

 

There have been no significant changes to our internal controls over financial reporting for the three-month period ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

 

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