F-1/A: Aeterna Zentaris Seeks to Acquire Ceapro Inc. Through Share and Warrant Issuance

Aeterna Zentaris is pursuing the acquisition of Ceapro Inc. through a plan of arrangement involving the issuance of common shares and new warrants to existing shareholders and warrant holders.

Summary

• Aeterna Zentaris Inc. has filed an amendment to its registration statement for a proposed acquisition of Ceapro Inc.
• The acquisition will be executed through a plan of arrangement, where Aeterna Zentaris will issue up to 633,606 common share purchase warrants (Aeterna Zentaris New Warrants) to existing shareholders and warrant holders.
• Up to 633,606 Common Shares are issuable upon exercise of the Aeterna Zentaris New Warrants.
• The Aeterna Zentaris New Warrants will be exercisable for one Common Share at an exercise price of $0.01 per share and will expire three years from the date of issuance.
• The exercise price is paid on a cashless basis.
• Aeterna Zentaris is also issuing up to 1,847,719 Common Shares to the holders of Ceapros outstanding common shares and replacement options exercisable for up to 67,918 Common Shares in exchange for outstanding options to purchase Ceapro common shares.
• The transaction is intended to be exempt from registration requirements under Section 3(a)(10) of the Securities Act of 1933.
• The company has applied to list all of its Common Shares issuable upon the exercise of the Aeterna Zentaris New Warrants on the TSX and has filed an initial listing application with the NASDAQ for the continued listing of its Common Shares.
• The Plan of Arrangement was approved by shareholders of both companies on March 12, 2024, and by the Court of Kings Bench of Alberta on March 28, 2024.
• The Effective Date has not occurred on or before June 14, 2024, the parties may terminate the Arrangement Agreement.

Sentiment

Score: 6

Explanation: The document is largely neutral, detailing the terms of a proposed acquisition. While the potential benefits of the merger are mentioned, the document also highlights significant risks and uncertainties, resulting in a moderate sentiment score.

Positives

• The acquisition is expected to create a long-term sustainable business.
• The combined company is expected to have greater potential for stable cash flow to support R&D.
• The combined company will have a more diversified commercial and development product pipeline.
• The combined company will have expanded pharmaceutical research and development capabilities.
• The combined company will have a stronger financial position and flexibility.
• The dual NASDAQ and TSX listing is expected to provide additional volume and an improved capital market profile for the Combined Company.

Negatives

• Ceapros results for the year ending on December 31, 2023 were significantly impacted by the planned spin-off, showing a sales decline of approximately 49% from C$18.8 million in 2022 to C$9.6 million in 2023.
• There is no established public trading market for the Aeterna Zentaris New Warrants, and the liquidity of the Aeterna Zentaris New Warrants will be limited.

Risks

• The Plan of Arrangement remains subject to satisfaction or waiver of several conditions.
• The Arrangement Agreement may be terminated.
• There can be no certainty with respect to the market value of the Consideration Shares that Ceapro Shareholders will receive.
• The issuance of a significant number of Common Shares could adversely affect the market price of the Common Shares.
• The Raymond James Fairness Opinion is based on many factors.
• The companies may be the targets of legal claims, securities class actions, derivative lawsuits and other claims.
• There could be unknown or undisclosed risks or liabilities of Ceapro.
• The systems, procedures and controls may not be adequate to support the expansion of operations and associated increased costs and complexity following and resulting from the Plan of Arrangement with Ceapro.
• The companies may be unable to successfully integrate their businesses with Ceapros and realize the anticipated benefits of the Plan of Arrangement.
• Failure by us or Ceapro to comply with applicable Laws prior to the Plan of Arrangement could subject the combined company to penalties and other adverse consequences following completion of the Plan of Arrangement.
• The trading price of the Common Shares following the Plan of Arrangement cannot be guaranteed, may be volatile and could be less than, on an adjusted basis, the current trading prices of Aeterna Zentaris and Ceapro due to various market-related and other factors.
• In the event that Aeterna Zentaris fails to satisfy any of the listing requirements of NASDAQ, including the Bid Price Rule, NASDAQ may reject Aeterna Zentaris application for the continued listing of the Common Shares on NASDAQ.
• It is possible that we may be a passive foreign investment company.

Future Outlook

The Combined Company expects to meet its cash needs for the twelve-month period following the date hereof based on current operations.

Management Comments

• The terms of the Arrangement Agreement were the result of arms length negotiations between Aeterna Zentaris and Ceapro and their respective advisors.

Industry Context

The announcement reflects a trend of consolidation in the biopharmaceutical industry, where companies seek to diversify their product pipelines and leverage synergies to improve financial performance and market position.

Comparison to Industry Standards

• The all-stock merger structure is common in the biopharmaceutical industry, allowing companies to combine resources without immediate cash outlays.
• Comparable transactions include mergers between specialty pharmaceutical companies seeking to expand their therapeutic focus or geographic reach.
• The success of the merger will depend on the ability of Aeterna Zentaris to integrate Ceapros operations and realize the anticipated synergies, similar to other mergers in the sector.

Management Changes

Stakeholder Impact

• Shareholders of both Aeterna Zentaris and Ceapro will be impacted by the dilution of their ownership as a result of the issuance of new shares.
• Employees of both companies may experience uncertainty about their future roles until integration plans are finalized.
• Customers and suppliers may delay or defer decisions concerning the companies due to the uncertainty surrounding the Plan of Arrangement.

Next Steps

• Obtain remaining regulatory approvals.
• Satisfy customary closing conditions.
• Complete the Plan of Arrangement.
• Delist Ceapro Shares from the TSXV.
• Apply for a decision for Ceapro to cease to be a reporting issuer under the Securities Laws of each jurisdiction of Canada in which it is a reporting issuer.

Key Dates

Keywords

Aeterna Zentaris, Ceapro, acquisition, warrants, common shares, plan of arrangement, merger, biopharmaceutical, pharmaceutical, biotechnology