** **

**U.S. SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

**FORM 40-F**

**[Check one]**

**o**                                 REGISTRATIONSTATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

**OR**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

| **For the fiscal year ended December 31, 2006** |   | **Commission File Number 0-30752** |
|-------------------------------------------------|--------|------------------------------------|

**ÆTERNA ZENTARIS INC.**

(Exact name of registrant as specified in its charter)

| **CANADA**                        |   | **2834**                     |   | **Not applicable**    |
|-----------------------------------|--------|------------------------------|--------|-----------------------|
| (Province or other jurisdiction   |   | (Primary Standard Industrial |   | (I.R.S. Employer)     |
| of incorporation or organization) |   | Classification Code Number)  |   | Identification Number |

**1405, boul. du Parc-Technologique**

**Québec,Québec**

**Canada,G1P 4P5**

**(418)652-8525**

(Address and telephone number of Registrant’s principal executiveoffices)

**CTCorporation System**

**111Eighth Avenue**

**13thFloor**

**New York,New York 10011**

**(212)894-8638**

(Name, address and telephone number of agent for service of process inthe United States)

Securities registered or to be registered pursuant to Section 12(b) ofthe Act.

| Title of each class | ** ** | **Name of each exchange on which registered** | ** ** |
|------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| Common Shares                      |       | NASDAQ Global Market                                                        |       |

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act.

**Not Applicable**

(Title of Class)

Securities forwhich there is a reporting obligation pursuant to Section 15(d) of the Act.

**Not Applicable**

(Title of Class)

For annualreports, indicate by check mark the information filed with this Form:

| x  Annual  information form |   | x  Audited  annual financial statements |
|---------------------------------------|--------|---------------------------------------------------|

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stockas of the close of the period covered by the annual report.

53,169,470 CommonShares Outstanding

0 First PreferredShares

0 Second Preferred Shares

Indicateby check mark whether the Registrant by filing the information contained inthis Form is also thereby furnishing the information to the Commission pursuantto Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”).  If “Yes” is marked, indicate the filingnumber assigned to the Registrant in connection with such Rule.

| Yes  o |   | No  x |
|------------------|--------|-----------------|

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the preceding 12 months (or forsuch shorter period that the Registrant was required to file such reports) and(2) has been subject to such filing requirements for the past 90 days.

| Yes  x |   | No  o |
|------------------|--------|-----------------|

 

 

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**ÆTERNA ZENTARIS INC.**

**ANNUAL REPORT ON FORM 40-F**

**DisclosureControls and Procedures**

The Registrant’s management,including the Registrant’s Chief Executive Officer and Chief Financial Officer,has evaluated the effectiveness of the Company’s disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, as amended), as of December 31, 2006. Based onthat evaluation, as of December 31, 2006, the Registrant’s Chief ExecutiveOfficer and Chief Financial Officer concluded that the Registrant’s disclosurecontrols and procedures are effective to ensure that informationrequired to be disclosed by the Registrant in reports that it files or submitsunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in Securities and Exchange Commission rules andforms and is accumulated and communicated to management, including theRegistrant’s Chief Executive Officer and Chief Financial Officer, as appropriate,to allow timely decisions regarding required disclosure.

**Management’sReport on Internal Control over Financial Reporting**

TheRegistrant’s management is responsible for establishing and maintainingadequate internal control over financial reporting. The Registrant’s internalcontrol over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generally acceptedaccounting principles in Canada(1).

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

TheRegistrant’s management, with the participation of the Registrant’s ChiefExecutive Officer and Chief Financial Officer, has evaluated the effectivenessof the Registrant’s internal control over financial reporting based on thecriteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). Basedon this evaluation, the Registrant’s management has concluded that, as ofDecember 31, 2006, the Registrant’s internal control over financialreporting was effective.

This annual report does not include an attestationreport of the Registrant’s registered public accounting firm regarding internalcontrol over financial reporting. Management’s report 

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(1)             Ourconsolidated financial statements are prepared in accordance with generallyaccepted accounting principles in Canada (“Canadian GAAP”) and significantdifferences in measurement from generally accepted accounting principles inUnited States (“U.S. GAAP”) are set out in note 24 to our consolidatedfinancial statements included as exhibit 99.2 in this report.

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was not subject to attestation by the Registrant’sregistered public accounting firm pursuant to temporary rules of the Securitiesand Exchange Commission that permit the Registrant to provide only management’sreport in this annual report.

**Changesin Internal Control over Financial Reporting**

There has been no change inthe Registrant’s internal control over financial reporting that occurred duringthe year ended December 31, 2006 that have materially affected, or arereasonably likely to materially affect, the Registrant’s internal control overfinancial reporting.

**NoticesPursuant to Regulation BTR**

None

**CorporateGovernance**

The Registrant is incompliance with the corporate governance requirements of The Nasdaq StockMarket, Inc. (“NASDAQ”) except as described below. The Registrant is not incompliance with the NASDAQ requirement that a quorum for a meeting of theholders of the common stock of the Registrant be no less than 33 1/3% of suchoutstanding shares. The by-laws of the Registrant provide that a quorum forpurposes of any meeting of shareholders of the Registrant consists of at least20% of the outstanding voting shares. The Registrant received an exemption fromNASDAQ from this quorum requirement because the quorum provided for in theby-laws of the Registrant is consistent with generally accepted businesspractices in Canada, the Registrant’s country of domicile, and with theToronto Stock Exchange, the principal market on which the Registrant’svoting shares are traded.

In addition, the Registrantfollows certain of its home country practices in lieu of compliance with theNASDAQ requirements that: (i) independent directors of the Registrant haveregularly scheduled meetings at which only independent directors are present (“executivesessions”); (ii) the compensation of the chief executive officer and the otherexecutive officers of the Registrant be determined, or recommended to theRegistrant’s Board of Directors for determination, by a compensation committeecomprised solely of independent directors; and (iii) the director nominees beselected, or recommended for selection by the Registrant’s Board of Directors,by a nominations committee comprised solely of independent directors. TheChairman of the Board of the Registrant from time to time ensures thatdirectors hold meetings at which senior management is not present, and theRegistrant’s Corporate Governance, Nominating and Human Resources Committee,which serves as the Registrant’s compensation and nominations committee, iscomprised of four members, three of whom are independent directors. SeeAnnex A to the Registrant’s Management Proxy Circular dated March 9, 2007,which is filed as Exhibit 99.5 to this annual report on Form 40-F. Inaccordance with applicable current NASDAQ requirements, the Registrant hasprovided to NASDAQ letters from outside counsel certifying that these practicesare not prohibited by the Registrant’s home country law.

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**Code ofEthical Conduct**

On March 29, 2004,the Board of Directors adopted a “Code of Ethical Conduct”, which was amendedby the Board of Directors on November 3, 2004, December 13, 2005 and March 2,2007. The December 13, 2005 amendment incorporates changes to the duty toreport violations consistent with applicable laws. The Registrant has selectedan independent third party supplier to provide a confidential and anonymouscommunication channel for reporting concerns about possible violations to theRegistrant’s Code of Ethical Conduct as well as financial and/or accountingirregularities or fraud. A copy of the Code of Ethical Conduct, as amended, isattached as Exhibit 99.7 to this annual report on Form 40-F and is alsoavailable on the Registrant’s Web site at www.aeternazentaris.com inInvestors/Governance. The Code of Ethical Conduct is a “code of ethics” asdefined in paragraph (9)(b) of General Instruction B to Form 40-F. The Code ofEthical Conduct applies to all of the Registrant’s employees, directors andofficers, including the Registrant’s principal executive officer, principalfinancial officer, and principal accounting officer or controller, or personsperforming similar functions, and includes specific provisions dealing withintegrity in accounting matters, conflicts of interest and compliance withapplicable laws and regulations. The Registrant will provide this document toany person or company upon request to the Corporate Secretary of theRegistrant, at its head office at 1405 du Parc-Technologique Boulevard,Quebec City, Quebec, G1P 4P5, Canada.

**AuditCommittee Financial Expert**

The Board of Directors ofthe Registrant has determined that the Registrant has at least one auditcommittee financial expert (as defined in paragraph 8(b) of General InstructionB to Form 40-F). The name of the audit committee financial expert of theRegistrant is Mr. Gérard Limoges, FCA, the Audit Committee’sChairman. The Commission has indicated that the designation of Mr. Limoges asthe audit committee financial expert of the Registrant does not (i) make Mr.Limoges an “expert” for any purpose, including without limitation for purposesof Section 11 of the Securities Act of 1933, as amended, as a result of thisdesignation; (ii) impose any duties, obligations or liability on Mr. Limogesthat are greater than those imposed on him as a member of the Audit Committeeand the Board of Directors in the absence of such designation; or (iii) affectthe duties, obligations or liability of any other member of the Audit Committeeor the Board of Directors.

**Audit Committee, External Auditor’s Fees and Pre-Approval Policies andProcedures**

The Registrant has a separatelydesignated standing Audit Committee established in accordance with Section3(a)(58)(A) of the Exchange Act. The Board of Directors is of the view thateach of the members of the Audit Committee is “independent” as defined by theMarketplace Rules of NASDAQ.

Information regarding thecomposition of the Registrant’s Audit Committee, the fees billed by theRegistrant’s external auditor for each of the years ended December 31, 2005 and2006 and the pre-approval policies and procedures adopted by the AuditCommittee is 

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incorporated into this annualreport on Form 40-F by reference from the Registrant’s Management ProxyCircular dated March 9, 2007, which is filed as Exhibit 99.5 to this annualreport on Form 40-F.

For each of the years ended December 31, 2005 and2006, none of the non-audit services provided by the Registrant’s externalauditor were approved by the Audit Committee pursuant to the “de minimisexception” to the pre-approval requirement for non-audit services.

**Off-BalanceSheet Arrangements**

As at December 31, 2006, the off-balance sheet arrangementconsist of letters of garantee. The off-balance sheet arrangements aredescribed in note 23 to our consolidated financial statements which are filedas Exhibit 99.2 to this annual report on Form 40-F.

**ContractualObligations**

The Registrant’s tabular disclosure of contractualobligations as of December 31, 2006 isincorporated into this annual report on Form 40-F by reference from theRegistrant’s Management’s Discussion and Analysis of Financial Conditionand Results of Operations for the financial year ended December 31, 2006, which is filed as Exhibit 99.4 to this annualreport on Form 40-F.

**Documents Filed Pursuant toGeneral Instructions**

In accordance with General Instruction D.(9) of Form40-F, the Registrant hereby files Exhibit 99.6 as set forth in the ExhibitIndex attached hereto.

**Undertakingand Consent to Service of Process**

**A.            Undertaking**

The Registrant undertakes to make available, in personor by telephone, representatives to respond to inquiries made by the Commissionstaff, and to furnish promptly, when requested to do so by the Commissionstaff, information relating to: the securities registered pursuant to Form40-F; the securities in relation to which the obligation to file an annualreport on Form 40-F arises; or transactions in said securities.

**B.****                                    Consentto Service of Process**

The Registrant has previously filed with theCommission a written consent to service of process and power of attorney onForm F-X.

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**Signatures**

Pursuant to the requirements of the Exchange Act, theRegistrant certifies that it meets all of the requirements for filing on Form40-F and has duly caused this Annual Report to be signed on its behalf by theundersigned, thereto duly authorized.
|                       |   | ÆTERNA ZENTARIS INC. |
|-----------------------|--------|---------------------------|
| Date: March 23,  2007 |   | By:                       |   |  |
|                  |   | Name:                     |   | Mario Paradis |
|                  |   | Title:                    |   | Vice-President, Finance & Administration |
|                  |   |                      |   | and Corporate Secretary |

 

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**EXHIBIT INDEX**
| Exhibit Number | ** ** | **Document**                                                                                                                                                                                                                                                                                                                                                         |
|----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1           |       | Certification of the Chief Executive Officer  pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                  |
| 31.2           |       | Certification of the Chief Financial Officer  pursuant to Section 302 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                  |
| 32.1           |       | Certification of the Chief Executive Officer  pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                  |
| 32.2           |       | Certification of the Chief Financial Officer  pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                  |
| 99.1           |       | Annual Information Form of  Registrant, dated March 23, 2007, for the year ended December 31,  2006                                                                                                                                                                                                                                                        |
| 99.2           |       | Audited  Consolidated Balance Sheets of Registrant, including the Notes thereto, as at  December 31, 2006 and 2005 and Audited Consolidated Statements of  Deficit, Consolidated Statements of Contributed Surplus, Consolidated  Statements of Operations and Consolidated Statements of Cash Flows for the  years ended December 31, 2006, 2005 and 2004 |
| 99.3           |       | Annual Report of the Registrant for the year ended  December 31, 2006                                                                                                                                                                                                                                                                                      |
| 99.4           |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations for  the financial year ended December 31, 2006                                                                                                                                                                                                                     |
| 99.5           |       | Registrant’s Management Proxy Circular dated  March 9, 2007                                                                                                                                                                                                                                                                                                |
| 99.6           |       | Consent of Independent Accountants                                                                                                                                                                                                                                                                                                                                   |
| 99.7           |       | Code of Ethical Conduct, as amended on March 2, 2007                                                                                                                                                                                                                                                                                                                 |

 

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