EQUITY RESEARCH

COMPANY UPDATE

Aeterna Zentaris Inc.

Biotechnology
11/16/2012 Closing Price 11.15.2012 12-Month Target Price: 52-Week Range: Market Cap (M): Shares O/S (000): Float (MM): Avg. Vol. (000) Debt (M) Dividend/Yield: Risk Profile: FYE: December 2011A 2012E 2013E GAAP EPS $0.00 ($1.00) ($0.77) $1.87 $9.00 $1.75-$13.00 $33.0 17,669 15,903 425 $0 $0.00/0.00% Speculative P/E nm nm nm

Buy

(AEZS NASDAQ - $1.87)

Reports the Quarter; Perifosine Multiple Myeloma Phase III Interim Analysis in 1Q13; Reiterate Buy
The company completed a busy quarter raising capital and moving closer to Perifosine data. The next major catalyst for the company should be the interim analysis of lead compound, Perifosine, which is expected to occur by 1Q13. The phase I/II data sets that the current pivotal trial is based on included less than 200 patients. Compared to controls and historical data, the active arm outperformed; we will see soon enough if the data sets carry across trials. Additional Sites (in Europe) for the PIII MM trial should keep timing on track. The pre-planned interim analysis by an independent Data Safety Monitoring Board ("DSMB") is expected upon reaching approximately 80 events (disease progression or death). The Company's partner for the Japanese market, Yakult Honsha Co. Ltd. ("Yakult") reported progress with the Phase 1 bridging study in MM initiated earlier this year and is also looking to expand work with perifosine in other indications. Stay tuned. Completed Financing: In October the company completed a public offering of 6.6 million units generating net proceeds of US$15.2 million. Each unit consisting of one common share and 0.45 of a warrant to purchase one common share, at a purchase price of US$2.50 per unit. The company (as of 9.30.2012) has pro forma cash and equivalents of $48 million, providing ample runway to develop the current pipeline. Beyond perifosine. The company also has a doxorubicin conjugate (AEZS-108) for endometrial cancer, with potential utility in bladder, breast, and prostate cancers, as well as a strong early pipeline of other candidates. This program is now on track to begin a pivotal trial in endometrial cancer. Management had filed for a SPA (Special Protocols Assessment) with the FDA. We expect this trial to move forward in 1Q13.

Aeterna Zentaris (AEZS)

Source: Bigcharts.com as of 11/16/2012

Jason Kolbert

(212) 895-3516

jkolbert@maximgrp.com

Diagnostic and therapeutic: AEZS-130. AEZS-130 (a ghrelin agonist) is being developed as a diagnostic test for adult growth hormone deficiency. The compound is also in a phase IIa study for cancerinduced cachexia, (first patient has been recruited). This trial is supported by a Cooperative Research and Development Agreement (CRADA) between AEZS and the Michael E. DeBakey Veterans Affairs Medical Center, which is funding the study. Valuation. We triangulate free cash flow (FCF), EPS, and sum of the parts. The critical assumption is the outcome of the interim analysis in the phase III multiple myeloma trial. We see the potential for perifosine to be >$500 million by 2017, which includes EU and Japan (royalty). Discounting this value back, averaged and equally weighted, suggests a $9.00 price target.

Maxim Group LLC 405 Lexington Avenue New York, NY 10174 www.maximgrp.com
SEE PAGES 7-9 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS

Aeterna Zentaris Inc. (AEZS)

Exhibit 1. Upcoming catalysts for Aeterna Zentaris

Product Perifosine Perifosine Perifosine Perifosine Perifosine Perifosine Perifosine Perifosine Perifosine Indication Perifosine Global Development Multiple Myeloma - Refractory USA Multiple Myeloma - Refractory USA Multiple Myeloma - Refractory USA Multiple Myeloma - Refractory EU Multiple Myeloma - Refractory Japan Multiple Myeloma - Refractory Japan Multiple Myeloma - Refractory Japan Multiple Myeloma - Refractory Japan Neuroblastoma Doxorubicin Conjugate Doxorubicin Conjugate- Endometrial Doxorubicin Conjugate- Endometrial Doxorubicin Conjugate- Endometrial Doxorubicin Conjugate- Endometrial Castrate & Taxane Resistant Prostate Castrate & Taxane Resistant Prostate Triple Negative Breast Cancer Bladder Diagnostic & Therapeutic Adult Growth Hormone Defficiency Diagnostic Adult Growth Hormone Defficiency Diagnostic Cancer Induced Cachexa Cancer Induced Cachexa Early Pipeline Prostate Cancer Oral Immunotherapy Disorazol-Z LHRH + Disoralzol-Z PI3K/ERT Inhibitors Tubulin Inhibitor, Topyel Isomerase Event Interim Analysis (based on 80 events), Phase III (SPA) trial, 80 sites, n=400 Completion of Phase III Trial (USA) at 265 Events Fast Track Status leads to Approval European Scientific Advise- EU Approval Phase 1 ":bridging" trial in Japan (partner Yakult) in combo with Velcade- Data Japan Extension Study driven by Yakult File in Japan Approval in Japan Neuroblastoma: PII/III Registrational Study Timeline 1Q-2013 2H-2014 2H-2015 2H-2015 1H-2013 2015 1H-2016 1H-2013 Impact ++ ++ +++ +++ + + ++ +++ +

AEZS-108 AEZS-108 AEZS-108 AEZS-108 AEZS-108 AEZS-108 AEZS-108 AEZS-108 AEZS-130 AEZS-130 AEZS-130 AEZS-130 AEZS-120 AEZS 137 AEZS 125 AEZS 129/136 AEZS 112

Phase III Start in Advanced recurrent Metastatic Endometrial Cancer: SPA N=500 patients, 80 sites, Global, Event Driven OS w/ Interim analysis 3 Years start to completions Approval Phase I/II POC Study Data ASCO in 2H -2013 (ASCO) Phase I/II : Castration & Taxance Resistant Prostate Cancer results Phase II in Breast Cancer - Initiation Phase II in Bladder (Investigator Driven) Small Study - data/results Oral Diagnostic Grehlin Agnonist- NDA Filing Priority Review Possible (6 Mos) Phase IIa Pilot Study (n=18-26) in cancer cachexia (muscle wasting) patients (enrollment/update) Top Line Data Presentation CTA Application to start P1 in Europe Highly Potent Doxorubicin , Next Generation 108 PreClinical Data Combination - PreClinical Data Sets conjugate Next Generation Perifosine IND Phase 1- Solid Tumors - New Formualtion

1Q-2013 2016 2017 2H-2013 2H-2013 1H-2013 2H-2013 1Q-2013 2014 2013 Q3-2013 4Q-2012 2013 2013 2014 2013

++ + +++ + + + + + ++ + + + + + + +

Stock Significance Scale: + of moderate importance; ++ higher level; +++ highly Source:Maxim Forecasts and Company reports.

Maxim Group LLC

Aeterna Zentaris Inc. (AEZS)

Bull Case. Aeterna Zentaris has a robust pipeline with an active phase III trial (perifosine in MM), as well as a second compound, AEZS-130 (ghrelin agonist), in phase III as a diagnostic in adult growth hormone deficiency. This compound could also have therapeutic potential to treat cancer patients and ameliorate the damage associated with muscle wasting (cachexia). Bulls also see great potential in the doxorubicin conjugate (AEZS-108), an LHRH receptor that thus far has shown a solid safety profile and efficacy in reproductive (endometrial) cancers, where a pivotal trial is now expected. In addition, the company has a healthy pipeline of earlier-stage assets, which include an enhanced LHRH conjugate (AEZS-125: LHRH & Disorazol-Z), a next generation PI3K/ERK inhibitor, an innovative oral prostate cancer vaccine, and an early-clinical-stage tubulin inhibitor (AEZS-112). Bulls believe that the pipeline valueplus the probabilities associated with the perifosine trial, the doxorubicin conjugate trial, and the ghrelin agonistrepresent upside versus the current valuation. Bear Case. Perifosine has already failed oncein colon cancer in Keryxs X-PECT trial. Keryx returned its North American rights to the company. The current phase III trial in MM is based on phase I/II trials with relatively small patient numbers (<200). While good, the results may not be reliable and reproduced in a larger study across more centers, where deviations from both historical data often occur as a result of better care in the control arm. As such, the predictive value of the phase I/II data set is minimal, and the 1Q13 interim analysis is not predictable. Aeterna Zentaris has already monetized its royalty rights ex-Japan to approved product Cetrotide. Today, the company has at least a year of operating capital and an ATM facility in place. Most institutional investors will not buy positions in front of such a facility. The doxorubicin conjugate may hold promise, but there have been multiple failures in the past of other known chemotherapeutic conjugate agents, and, as such, its too early to factor value into a model. The potential of the ghrelin agonist as a diagnostic is strong, but the modest pricing may limit the potential. Expanding the product to a therapeutic is still years away, as is the rest of the pipeline. Our Take. We believe that perifosine is an active agent, and we are hopeful that the first interim analysis of the current pivotal trial in MM will be positive. We have seen multiple oncology drugs fail one indication and succeed in others, such as Avastin. In this case, having carefully evaluated the data in colon cancer and understanding the dosing and other trial differences, we believe odds favor a positive outcome. We also believe that the data for AEZS-108 (doxorubicin conjugate) suggests strong activity and limited toxicity versus the unconjugated version. We see a large potential in multiple cancers in the out years. We also see the ghrelin agonist as an excellent license opportunity, especially with a partner who will commit the funds to develop the product for therapeutic potential in cachexia. We model through 2017 and include the revenue we have outlined and apply a high discount rate of 30% to derive a valuation ($7) significantly higher than the current <$1 stock price. We believe the valuation disconnect is in part due to a lack of understanding over perifosines potential in MM versus the outcome in colon cancer.

Maxim Group LLC

Aeterna Zentaris Inc. (AEZS)

VALUATION Our valuation metrics for Aeterna Zentaris assume that perifosine, AEZS-108 (doxorubicin conjugate), and AEZS-130 are all successfully developed. We project these revenues in our models. Each modelFCFF, EPS, and SOPare equally weighted in our calculations. We use a 30% discount rate, as we feel perifosine is a high-risk product in multiple myeloma, but we also include doxorubicin conjugate and AEZS-130 (diagnostic) with outyear potential as a therapeutic for muscle wasting as a side effect of cancer treatment. Combined, we believe these products represent a substantial global opportunity. Our model assumes dilution and uses a forecast share count for 2017. The average of these three metrics, equal weighted is $9.00 per share. Exhibit 2. FCFF Model We use a 30% discount rate and assume that perifosine, AEZS-108 (doxorubicin conjugate), and AEZS-130 are all successfully developed.
Price Target $ Year DCF Valuation Using FCF (mln): units (millions - $) EBIT Tax Rate EBIT(1-t) CapEx Depreciation Change in NWC FCF PV of FCF Discount Rate Long Term Growth Rate Terminal Cash Flow Terminal Value YE2017 NPV NPV-Debt Shares out (thousands) NPV Per Share
Source: Maxim estimates

7 2012

2012E (29,188) 0% (29,188) (152) 869 4,773 (33,244) (25,572) 30% 1% 821,177 221,167 248,490 668 36,759 7

2013E (26,061) 0% (26,061) (198) 904 (25,355) (15,003)

2014E (33,479) 0% (33,479) (257) 940 (32,796) (14,928)

2015E (35,844) 5% (34,051) (250) 978 (33,324) (11,668)

2016E 104,113 15% 88,496 (1,000) 1,017 88,512 30,991

2017E 368,792 36% 236,026 (1,300) 1,057 235,783 63,503

2017E

Exhibit 3. Discounted EPS Model We use a 30% discount rate and a 10x peer multiple on 2017 projected EPS.
Current Year Year of EPS Earnings Multiple Discount Factor Selected Year EPS NPV
Source: Maxim estimates

$ $

2012 2016 10 30% 2.42 8 Earnings Multiple

8.5 0 5 10 15 20 25 30 35

Discount Rate and Earnings Multiple Varies, Year is 2016 EPS 5% 10% 15% 20% $0.00 $0.00 $0.00 $0.00 $9.97 $8.28 $6.93 $5.85 $19.95 $16.56 $13.86 $11.69 $29.92 $24.84 $20.80 $17.54 $39.90 $33.12 $27.73 $23.39 $49.87 $41.40 $34.66 $29.23 $59.85 $49.69 $41.59 $35.08 $69.82 $57.97 $48.52 $40.93

Constant 25% $0.00 $4.97 $9.93 $14.90 $19.86 $24.83 $29.80 $34.76 30% 4.24 8.49 12.73 16.98 21.22 25.47 29.71

$ $ $ $ $ $ $ $

Maxim Group LLC

Aeterna Zentaris Inc. (AEZS)

Exhibit 4. Sum of the Parts Model

Aetrna Zentaris Perifosine - MM USA NPV Perifosine - MM EU NPV Perifosine - MM Japan NPV AEZS 108 NPV AEZS 130 NPV AEZS Other NPV Net Margin MM Shrs OS Total
Source: Maxim estimates

LT Gr 1% 1% 1% 1% 1% 1%

Discount Rate 30% 30% 30% 30% 30% 30%

Yrs. to Mkt 4 4 6 5 5 6

% Success 55% 55% 55% 25% 25% 10%

Peak Sales MM's $300 $300 $150 $500 $400 $200

Term Val $1,034 $3.25 $1,034 $3.25 $517 $0.96 $1,724 $1.89 $1,379 $1.52 $690 $0.23 60% 37 $11

FUNDAMENTAL RISKS
Forecasting the Outcome of the Perifosine Pivotal Trial. We believe the principal risk in the stock today is the outcome of the event-driven interim analysis (around the phase III trial) with Perifosine. In addition, the company has pipeline risk associated with its other productsspecifically the doxorubicin conjugate, AEZS-108, and AEZS-130 (diagnostic and, later, a therapeutic). Partner Risk and Partnership Risk. The company is currently partnered with Yakult in Japan and does not control that companys decisions or timeline. In addition, the company may lack resources to develop its pipeline and may choose to see a partner. There are no assurances that the company will be successful to do so, or will be able to do so, on favorable terms. Competition. There are currently multiple products in development by other companies expected to compete with the pipeline and therapeutic indications that the company is pursuing. Regulatory. Predicting the decisions of the respective regulatory bodies is complex. The company will require regulatory approval from European, U.S., and Japanese regulators, as well as other geographies. Financing Risk. Aeterna Zentaris is like many micro-capitalized biotechnology companies. The company faces the challenge of raising capital to continue the development of its therapeutic pipeline.

Maxim Group LLC

Aeterna Zentaris Inc. (AEZS)

Aeterna Zentaris Corporation Income Statements

(In thousands, except per share data)
Aeterna Zentaris Inc. Income Statement ($ '000) AEZS: YE Dec. 31 Revenue (000's) Perifos ine: US Market Only % Sequential Growth Perifos ine: EU Market Only % Sequential Growth AEZS-108 Doxorubicin Conjugate (all indications ) % Sequential Growth AEZS- Grehlin Antagonis t _ Diagnos tic % Sequential Growth AEZS- Grehlin Antagonis t _ Therapuetic (Cachexia) % Sequential Growth AEZS- 120, 125 & 137 (Oncology) % Sequential Growth Sales & Royalties (Cetrotide ivf) % Sequential Growth Licens e fees and other % Sequential Growth Total Product Sales % Chg Perifos ine: Japan and WW Market Only- 20% Royalty Rate % Sequential Growth ` 9,510 7,471 7,139 7,200 31,320 32,297 3% 36,502 13% 51,456 41% 1,202 232 313 200 1,947 2,336 ` 8,308 7,239 6,826 7,000 29,373 29,960 30,560 2% 2,804 31,171 2% 3,364 31,794 2% 4,037 20% 233,937 355% 2,544 32,430 2% 4,845 20% 543,579 132% 8,756 244% ` ` ` 3,139 10,793 244% 17,868 66% 1,465 22,393 25% 20,557 1303% ` ` 3,531 2,597 75,751 2817% 103,021 2817% 142,080 88% 193,228 88% 128,046 1Q12A 2Q12A 3Q12A 4Q12E 2012E 2013E 2014E 2015E 2016E 2017E

Total Revenues % Chg Expenses COGS COGS % Sales R&D R&D % Rev's SG&A SG&A % Total expenses Oper. Inc. (Los s ) Oper Margin Inves tm ent Incom e Interes t Expens e FX Adjus tm ent Pre-tax income Pretax Margin Taxes (or benefits ) Tax Rate GAAP NI Net Margin GAAP-EPS Non GAAP EPS (dil) Wgtd Avg Shrs (Bas ) - '000s Wgtd Avg Shrs (Dil) - '000s
Source: Company reports and Maxim

9,510

7,471

7,139

7,200

31,320 -

32,297 3% 24,000 74% 24,000 74% 16,000 58,400 (26,103) NM (26,103) NM 0% (26,103) NM (0.77) (0.77) 32,762 32,762

36,502 13% 24,000 66% 28,000 77% 18,000 70,000 (33,498) NM (33,498) NM 0% (33,498) NM (0.88) (0.88) 37,901 37,901

51,456 41% 34,291 67% 32,000 62% 21,000 87,291 (35,835) NM (35,835) NM (1,792) 5% (34,043) NM (0.79) (0.79) 43,060 43,060

233,937 355% 70,787 30% 36,000 15% 23,000 129,787 104,150 45% 104,150 45% 15,623 15% 88,529 38% 2.05 2.05 43,157 43,157

543,579 132% 108,716 20% 41,000 8% 25,000 174,716 368,863 68% 368,864 68% 132,792 36% 236,074 43% 5.46 5.46 43,216 43,216

7,513 79% 5,572 3,213 16,298 (6,788) 77 (4,740) (255) (11,706) NM 0% (11,706) (0.66) (0.66) 17,669 17,669

6,262 84% 5,167 3,642 15,071 (7,600) NM 12,145 (5) 52 4,592 61% 0% 4,592 61% 0.25 0.25 18,510 18,510

5,556 78% 4,342 2,921 12,819 (5,680) NM 35 (909) (97) (6,651) NM 0% (6,651) NM (0.36) (0.36) 18,703 18,703

6,000 83% 5,000 69% 3,600 14,600 (7,400) NM (7,400) NM 0% (7,400) NM (0.23) (0.23) 27,685 32,000

25,331 81% 20,081 64% 13,376 58,788 (27,468) NM 12,257 (15,211) NM 0% (15,211) NM (1.00) (1.00) 20,642 20,642

Source: Company reports and Maxim Group LLC estimates.

Jason Kolbert jkolbert@maximgrp.com

Maxim Group LLC

DISCLOSURES

Source: Investars

Maxim Group expects to receive or intends to seek compensation for investment banking services from Aeterna Zentaris Inc. in the next 3 months. I, Jason Kolbert, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firms total revenues, a portion of which is generated by investment banking activities. Valuation Methods: Our valuation metrics for Aeterna Zentaris assume that perifosine, AEZS-108 (doxorubicin conjugate), and AEZS-130 are all successfully developed. We project these revenues in our models. Each modelFCFF, EPS, and SOPare equally weighted in our calculations. We use a 30% discount rate, as we feel perifosine is a high-risk product in multiple myeloma, but we also include doxorubicin conjugate and AEZS-130 (diagnostic) with outyear potential as a therapeutic for muscle wasting as a side effect of cancer treatment. Combined, we believe these products represent a substantial global opportunity. Our model assumes dilution and uses a forecast share count for 2017. The average of these three metrics, equal weighted is $9.00 per share.

Maxim Group LLC

Price Target and Investment Risks: Aside from general market and other economic risks, risks particular to our price target and rating for Aeterna Zentaris Inc. include: 1) The interim analysis of the phase III perifosine trial; 2) The outcome of clinical development for the other pipeline products; 3) The ability of the company to raise capital; 4) Competitive products may limit market share penetration; and 5) Regulatory risk associated with EU, FDA, and Koseisho regulatory agencies in Europe, the United States, and Japan.

RISK RATINGS Risk ratings take into account both fundamental criteria and price volatility. Speculative Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors. High Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individual investors. Medium Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average. Low Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry.

Maxim Group LLC

DISCLAIMERS Some companies that Maxim Group LLC follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in Maxim Group LLC research reports may not be suitable for some investors. Investors must make their own determination as to the appropriateness of an investment in any securities referred to herein, based on their specific investment objectives, financial status and risk tolerance. This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned herein. This publication is confidential for the information of the addressee only and may not be reproduced in whole or in part, copies circulated, or disclosed to another party, without the prior written consent of Maxim Group, LLC (Maxim). Information and opinions presented in this report have been obtained or derived from sources believed by Maxim to be reliable, but Maxim makes no representation as to their accuracy or completeness. The aforementioned sentence does not apply to the disclosures required by NASD Rule 2711. Maxim accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to Maxim. This report is not to be relied upon in substitution for the exercise of independent judgment. Maxim may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and Maxim is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by Maxim and are subject to change without notice. The price, value of and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Investors in securities such as ADRs, the values of which are influenced by currency volatility, effectively assume this risk. Securities recommended, offered or sold by Maxim: (1) are not insured by the Federal Deposit Insurance Company; (2) are not deposits or other obligations of any insured depository institution; and 3) are subject to investment risks, including the possible loss of principal invested. Indeed, in the case of some investments, the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support these losses.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST

Maxim Group LLC