TMX group

Quarter marked by several significant advancements in pipeline

All amounts are in U.S. dollars

QUEBEC CITY, Aug. 11 /CNW Telbec/ - AEterna Zentaris Inc. (TSX: AEZ;
NASDAQ: AEZS) today reported financial and operating results for the second
quarter ended June 30, 2006.
"During the second quarter, we made great strides in advancing our
products through the pipeline at all stages as exemplified by Cetrotide(R)'s
marketing approval in Japan, our successful meeting with the FDA leading to
the upcoming filing of an IND to move forward into Phase 3 clinical
development of cetrorelix in benign prostatic hyperplasia (BPH), as well as
the disclosure of positive clinical results in cancer with perifosine and     
AN-152. Most recently, we disclosed positive Phase 2 results for ozarelix in
prostate cancer which will enable us to pursue further clinical trials in this
indication. Additionally, we signed a license and collaboration agreement in
Japan with Nippon Kayaku for ozarelix in oncology," said Gilles Gagnon,
AEterna Zentaris' President and Chief Executive Officer. "We are very pleased
with these achievements which are an integral part of the Company's strategy
designed to build a strong and innovative pipeline focused on oncology and
endocrinology. We now look forward to continued success as we aggressively
advance our lead compounds."

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Key Developments for the Quarter Ended June 30, 2006

- Market approval for Cetrotide(R) (cetrorelix) in Japan for in vitro
  fertilization - Cetrotide(R) (cetrorelix) will be manufactured and
  marketed in Japan by AEterna Zentaris' partners Nippon Kayaku Co., Ltd.
  and Shionogi & Co., Ltd. with an expected launch in Japan by year-end;

- Green light from FDA to file IND to move forward into Phase 3 program
  with cetrorelix in BPH - The FDA reviewed the safety and efficacy data
  from an extensive Phase 2 program with cetrorelix for the treatment of
  benign prostatic hyperplasia (BPH). AEterna Zentaris plans to submit an
  Investigational New Drug (IND) application to the FDA by year-end for
  the initiation of a Phase 3 program for cetrorelix in BPH;

- Positive interim Phase 2 data of perifosine in advanced renal cell
  carcinoma - Interim results of a multi-center Phase 2 trial by the
  Company's partner, Keryx Biopharmaceuticals, showed a 43% partial
  response rate;

- Positive data from ongoing Phase 1 trial with AN-152 for gynaecological
  and breast cancers presented at ASCO - Phase 1 results for AEterna
  Zentaris' cytotoxic conjugate AN-152 in patients with gynaecological
  and breast cancers showed that the compound has a good safety profile
  and no dose-limiting toxicities reached so far in the selected dose
  levels;

- Positive in vivo data on ZEN-019 (oral LHRH antagonist peptidomimetic)
  presented at ENDO 2006 - ZEN-019 demonstrated in vivo activity by
  suppressing plasma testosterone levels. In vivo data showed that using
  ZEN-019 with a single, oral administration (20 mg/kg) in rats, led to
  efficient and revocable suppression of plasma testosterone levels for
  up to 12 hours. Furthermore, a repeat of the dosing of ZEN-019
  increased the suppression time without accumulation in the plasma.

Financial Results for the Quarter Ended June 30, 2006

Consolidated revenues for the quarter ended June 30, 2006 totalled
$83.4 million compared to $60.1 million for the same period in 2005.
Consolidated Research and Development expenses, net of tax credits and
grants increased to $7.4 million for the quarter ended June 30, 2006 compared
to $6.1 million for the same period in 2005.
Consolidated selling, general and administrative expenses totalled
$15.5 million for the quarter ended June 30, 2006 compared to $10 million for
the same period in 2005.
Consolidated net loss for the quarter ended June 30, 2006 was $1.6 million
or $0.03 per basic and diluted share compared to consolidated net earnings of
$13.3 million or $0.28 per diluted share for the same period in 2005. Without
taking into account a non-cash and non-recurring gain on dilution of
investments of $16.4 million recorded last year following the Company's
subsidiary Atrium Biotechnologies' Initital Public Offering (IPO), AEterna
Zentaris would have recorded a consolidated net loss of $3.1 million or $0.07
per basic and diluted share in the second quarter of 2005, compared to the
$1.6 million or $0.03 per basic and diluted share consolidated net loss
registered for the second quarter 2006. This $1.5 million decrease is mainly
attributable to increased net earnings of $1.1 million from Atrium
Biotechnologies and to the reduction of the operating loss from AEterna
Zentaris' Biopharmaceutical segment.
Cash, cash equivalents and short-term investments reached $47 million for
the quarter ended June 30, 2006 compared to $52.7 million as of December 31,
2005. More than $27 million was dedicated to the Company's Biopharmaceutical
segment as of June 30, 2006.
Dennis Turpin, Vice President and Chief Financial Officer of AEterna
Zentaris, commented, "As we continue to successfully implement our strategy,
we are pleased to maintain a sound financial position, including the ability
to leverage our assets as we continue to execute our plan and aggressively
advance our pipeline. We are financially poised to continue our investment in
R&D, as well as support our growing business."

Developments Subsequent to Quarter End

- Positive Phase 2 results for ozarelix in prostate cancer - The study
  achieved its primary end-point of defining a tolerable dosage regimen
  of ozarelix that would ensure continuous suppression of testosterone at
  castration level ((less than) 0.5 ng/ml) for a three-month test period.
  An important secondary efficacy end-point of the study aimed at
  assessing tumour response as determined by a 50% or greater reduction
  of serum PSA levels, compared to baseline, was also achieved.

- Licence and collaboration agreement with Nippon Kayaku for ozarelix in
  oncology - AEterna Zentaris granted Nippon Kayaku an exclusive license
  to develop and market ozarelix for all potential oncological
  indications in Japan.

Conference Call Information

Management will be hosting a conference call for the investment community
beginning at 11:00 a.m. Eastern Time today, Friday, August 11, to discuss 2006
second quarter financial and operating results, followed by a question and
answer session.
To participate in the live conference call by telephone, please dial
   800-257-3401. Individuals interested in listening to the conference call on
the Internet may do so by visiting www.aeternazentaris.com. A replay will be
available on the Company's Web site for 30 days.

About AEterna Zentaris Inc.

AEterna Zentaris Inc. is a growing global biopharmaceutical company
focused on oncology and endocrine therapy with proven expertise in drug
discovery, development and commercialization.
AEterna Zentaris also owns 48.26% of the equity of Atrium Biotechnologies
Inc. (TSX: ATB) and 64.69% of its voting rights. Atrium is a developer,
manufacturer and marketer of science-based products for the cosmetics,
pharmaceutical, chemical and nutritional industries.
News releases and additional information are available at
www.aeternazentaris.com.

Forward-Looking Statements

This press release contains forward-looking statements 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 business
opportunities in the pharmaceutical industry, uncertainties related to the
regulatory process and general changes in economic conditions. Investors
should consult the Company's 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.

Attachment: Financial summary


(In thousands of Canadian dollars,
 except share and per share data)
                                  Quarters ended        Six months ended
CONSOLIDATED RESULTS                     June 30,                June 30,
Unaudited                       2006        2005        2006        2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
                                   $           $           $           $
Revenues                      83,390      60,144     167,867     122,009
-------------------------------------------------------------------------

Operating expenses
Cost of sales                 52,619      38,564     109,815      75,727
Selling, general and
 administrative               15,517      10,014      29,084      19,949
R&D costs, net of tax
 credits and grants            7,380       6,099      14,281      12,545
Depreciation and
 amortization                  2,478       2,011       4,859       3,829
-------------------------------------------------------------------------
                              77,994      56,689     158,039     112,050
-------------------------------------------------------------------------
Earnings from operations       5,396       3,456       9,828       9,959

Interest income                  455         426         875         732
Interest expense              (2,004)     (2,668)     (5,227)     (4,826)
Foreign exchange
 gain (loss)                    (295)       (155)        (83)         53
-------------------------------------------------------------------------
Earnings before the
 following items               3,552       1,059       5,393       5,918

Current income taxes          (2,395)     (2,131)     (4,391)     (4,252)
Future income taxes              630         (65)      1,819      (1,162)
Gain (loss) on dilution
 of investments                  (81)     16,393        (135)     16,393
Non-controlling interest      (3,268)     (1,980)     (6,828)     (3,503)
-------------------------------------------------------------------------
Net earnings (loss)
 for the period               (1,562)     13,276      (4,142)     13,394
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net earnings (loss)
 per share
  Basic                        (0.03)       0.29       (0.08)       0.29
-------------------------------------------------------------------------
-------------------------------------------------------------------------
  Diluted                      (0.03)       0.28       (0.08)       0.28
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Weighted average
 number of shares
  Basic                   52,682,969  46,139,814  52,098,592  46,139,814
  Diluted                 53,261,928  46,448,125  52,651,808  46,506,728
Issued and
 outstanding shares                                           53,160,970


Biopharmaceutical Segment - Selected Financial Information
(In thousands of US dollars)
                                  Quarters ended        Six months ended
Unaudited                                June 30,                June 30,
                                2006        2005        2006        2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
                                   $           $           $           $
Revenues
  Sales and royalties          5,228       5,381      11,803      12,279
  License fees                 4,155       4,779       6,328      11,628
-------------------------------------------------------------------------
                               9,383      10,160      18,131      23,907
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cost of sales                  1,404       1,835       4,045       4,169
Selling and
 administrative                4,515       3,907       8,360       7,285
R&D expense, net of
 tax credits and grants        7,262       6,081      14,066      12,431
Depreciation and
 amortization                  1,653       1,708       3,216       3,258
-------------------------------------------------------------------------
                              14,834      13,531      29,687      27,143
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Loss from operations          (5,451)     (3,371)    (11,556)     (3,236)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Cash flows generated
 (used) by operating
 activities                   (3,518)      1,076      (7,042)        247
-------------------------------------------------------------------------
-------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET                             As at       As at
                                                        June    December
                                                          30,         31,
Unaudited                                               2006        2005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
                                                           $           $
Cash and short-term investments                       47,041      52,705
Other current assets                                 111,178     110,971
                                                -------------------------
                                                     158,219     163,676
Long-term assets                                     277,404     263,835
                                                -------------------------
Total assets                                         435,623     427,511
                                                -------------------------
                                                -------------------------

Current liabilities                                   62,378      64,174
Long-term debt                                       100,706     135,743
Other long-term liabilities                           54,423      53,532
Non-controlling interest                              74,760      64,531
                                                -------------------------
                                                     292,267     317,980
Shareholders' equity                                 143,356     109,531
                                                -------------------------
Total liabilities and shareholders' equity           435,623     427,511
                                                -------------------------
                                                -------------------------
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