MISSISSAUGA, ON, July 10 /PRNewswire-FirstCall/ - Vasogen Inc. , today reported the results of operations for the second quarter of 2007. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.
At May 31, 2007, our cash and cash equivalents and restricted cash totaled $33.8 million, compared with $36.8 million at November 30, 2006, and $27.4 million at February 28, 2007. The change in our cash position resulted from net proceeds of $15.4 million from our May 2007 financing, partially offset by cash used for operations. Our net cash used in operations for the three months and six months ended May 31, 2007, was $7.9 million and $16.9 million, respectively. The net cash used in operations includes restructuring costs for the three months and six months ended May 31, 2007 of $2.5 million and $2.9 million, respectively.
As of April 1, 2007, the outstanding principal balance of our senior convertible notes was fully repaid. From September 1, 2006, we were required, under the terms of the convertible notes, to maintain a balance of cash, including restricted cash and marketable securities, equal to 110% of the convertible notes outstanding. We satisfied this cash test at all times. With the repayment of our convertible notes during this quarter, the remaining balance of our restricted cash will become unrestricted during the third quarter.
The net loss for the second quarter of 2007 was $9.7 million, or $0.54 per common share, compared with a net loss of $22.4 million, or $2.59 per common share for the same period in 2006. We incurred a net loss for the six months ended May 31, 2007 of $17.4 million, or $1.02 per common share, compared with a net loss of $41.8 million, or $4.93 per common share for the same period in 2006. The key drivers of our reduced losses in 2007 are lower costs associated with the completion of our phase III clinical programs, the corporate costs associated with supporting these programs, and a reduction in expenses associated with our senior convertible notes. The difference between cash used in operations and our accounting loss is driven by non-cash items, such as certain expenses related to our senior convertible notes, stock option expense, and unrealized foreign exchange gains and losses.
Vasogen is also today announcing the appointment of Graham D. Neil, CA, to the position of Chief Financial Officer. Mr. Neil has served with Vasogen for over seven years and has played a progressive and integral role in Vasogen’s internal control, financial management and reporting. He joined the Company as Controller in 1999 and most recently served as Director of Finance. Mr. Neil holds a Chartered Accountant designation and prior to joining Vasogen, he was with KPMG, LLP.
Highlights - On June 27, 2007, we announced the outcome of a meeting with the Food and Drug Administration (FDA) regarding the next steps in the development of our Celacade technology for the treatment of chronic heart failure in the United States. During the meeting, we discussed with the FDA the results of the ACCLAIM study, with a particular focus on the 689-patient subgroup with NYHA Class II heart failure. As a result of this meeting, the FDA has strongly recommended that we conduct a confirmatory study to support a Pre-market Approval (PMA) filing and also recommended that we consider utilizing a Bayesian statistical approach to designing the confirmatory trial. The Bayesian approach involves a specific trial methodology that allows utilization of prior trial results with a confirmatory study to obtain additional information regarding efficacy and safety and has the potential to substantially reduce the number of patients required for a confirmatory study, as well as the cost and duration. Having received the FDA’s input, we are now in a position to fully evaluate our options with respect to a confirmatory trial that could potentially be smaller than the 689-patient NYHA Class II subgroup of patients in ACCLAIM if we elected a Bayesian approach. We are continuing our ongoing dialogue with the FDA, as well as consulting our statistical experts and other advisors to review trial design options. - On June 20, 2007, we announced that Chris Waddick, MBA, CMA, succeeded Terrance H. Gregg as President and CEO of our Company. Mr. Waddick, who previously served as Chief Operating Officer and Chief Financial Officer, has held a series of progressive senior management positions at Vasogen over the past twelve years. During his tenure, he has played a key role in our development and strategic direction and has been responsible for operations since 2005. Mr. Waddick was also appointed to Vasogen’s Board of Directors. In March 2007, Mr. Gregg succeeded David G. Elsley as President and Chief Executive Officer of Vasogen. Mr. Gregg, who has served on our Board of Directors since 1999, and who was appointed Chairman in March 2006, remains Chairman of Vasogen’s Board of Directors. - On May 24, 2007, we announced the closing of a financing for net proceeds of $15.4 million through the sale of our common shares to institutional investors at a price of US$3.25. Under the terms of the purchase agreements, we also issued 5-year warrants to purchase an additional 3.7 million common shares at an exercise price of US$3.16 per share. - On April 18, 2007 we announced a collaboration with Grupo Ferrer Internacional, S.A., a leading European pharmaceutical and medical devices company, to commercialize Vasogen’s Celacade technology for the treatment of chronic heart failure in specified countries of the European Union and in certain Latin American countries.
As previously announced, a conference call will be conducted on July 10, 2007, at 4:30 p.m. Eastern time. The conference call may be accessed by calling 416-695-6623 or 1-877-461-2814 ten minutes prior to the call. An audio web cast of the event will also be available at www.vasogen.com. A re-broadcast of the conference call may be accessed by calling 416-641-2130 or 1-888-330-1923, PIN code 6543 followed by the number sign, and will also be available at www.vasogen.com
About Vasogen:
Vasogen is a biotechnology company engaged in the research and commercial development of therapies designed to target the destructive inflammatory process associated with the development and progression of cardiovascular and neurodegenerative disorders. The Company’s lead product, the Celacade(TM) technology, is designed to activate the immune response to apoptosis - an important physiological process that regulates inflammation. Celacade(TM) is in late-stage development for the treatment of chronic heart failure and has received European regulatory approval under the CE Mark for this indication. Vasogen is also developing a new class of drugs for the treatment of certain neuro-inflammatory disorders and is preparing to advance VP025, the lead drug candidate from this new class, into phase II development.
Certain statements contained in this press release, the upcoming conference call and webcast, or elsewhere in our public documents constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and/or “forward-looking information” under the Securities Act (Ontario). These statements may include, without limitation, summary statements relating to results of the ACCLAIM trial in patients with chronic heart failure, plans to advance the development of Celacade(TM), plans to fund our current activities, statements concerning our partnering activities and health regulatory submissions, strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimated”, “predicts”, “potential”, “continue”, “intends”, “could”, or the negative of such terms or other comparable terminology. We made a number of assumptions in the preparation of these forward-looking statements, including assumptions about the nature, size and accessibility of the market for Celacade in the treatment of chronic heart failure, particularly in Europe, the regulatory approval process leading to commercialization and the availability of capital on acceptable terms to pursue the development of Celacade, and the feasibility of additional trials. You should not place undue reliance on our forward-looking statements which are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the outcome of further ongoing analysis of the ACCLAIM trial results, the requirement or election to conduct additional clinical trials and the size and design of any such trails, delays or setbacks in the regulatory approval process, difficulties in the maintenance of existing regulatory approvals, securing and maintaining corporate alliances, the need for additional capital and the effect of capital market conditions and other factors on capital availability, the potential dilutive effects of any financing, risks associated with the outcomes of our preclinical and clinical research and development programs, the adequacy, timing and results of our clinical trials, competition, market acceptance of our products, the availability of government and insurance reimbursements for our products, the strength of intellectual property, reliance on partners, subcontractors, and key personnel, losses due to fluctuations in the U.S.-Canadian exchange rate, and other risks detailed from time to time in our public disclosure documents or other filings with the Canadian and U.S. securities commissions or other securities regulatory bodies. Additional risks and uncertainties relating to our Company and our business can be found in the “Risk Factors” section of our Annual Information Form and Form 20-F for the year ended November 30, 2006, as well as in our later public filings. The forward-looking statements are made as of the date hereof, and we disclaim any intention and have no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Unless otherwise indicated, numerical values indicating the statistical significance (“p-values”) of results included in this document are based on analyses that do not account for endpoint multiplicity.
The unaudited interim consolidated financial statements, accompanying notes to the unaudited interim consolidated financial statements, and Management’s Discussion and Analysis for the three months and six months ended May 31, 2007, will be accessible on Vasogen’s Website at www.vasogen.com and will be available on SEDAR and EDGAR. Summary financial tables are provided below.
VASOGEN INC. (A DEVELOPMENT STAGE COMPANY) Interim Consolidated Balance Sheets (In thousands of Canadian dollars) ------------------------------------------------------------------------- May 31, November 30, 2007 2006 ------------------------------------------------------------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 30,696 $ 30,427 Restricted cash 3,078 6,403 Clinical supplies 1,248 1,211 Tax credits recoverable 1,330 1,327 Prepaid expenses and deposits 779 1,384 ----------------------------------------------------------------------- 37,131 40,752 Property and equipment 529 615 Acquired technology 127 253 Deferred financing costs - 150 ------------------------------------------------------------------------- $ 37,787 $ 41,770 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 896 $ 3,369 Accrued liabilities 2,672 5,067 Senior convertible notes payable - 8,754 ----------------------------------------------------------------------- 3,568 17,190 Shareholders’ equity Share capital: Authorized: Unlimited common shares, without par value Issued and outstanding: 22,391,402 common shares (November 30, 2006 - 15,665,134) 365,670 344,217 Stock-based compensation 10,950 10,713 Equity component of senior convertible notes payable - 1,639 Warrants 16,725 11,390 Contributed surplus 11,252 7,995 Deficit (370,378) (351,374) ----------------------------------------------------------------------- 34,219 24,580 ------------------------------------------------------------------------- $ 37,787 $ 41,770 ------------------------------------------------------------------------- ------------------------------------------------------------------------- VASOGEN INC. (A DEVELOPMENT STAGE COMPANY) Interim Consolidated Statements of Operations, Deficit and Comprehensive Income (In thousands of Canadian dollars, except per share amounts) (Unaudited) ------------------------------------------------------------------------- Period from December 1, Three months ended Six months ended 1987 to May 31, May 31, May 31, 2007 2006 2007 2006 2007 ------------------------------------------------------------------------- Expenses: Research and development $ 3,736 $ 11,029 $ 6,759 $ 22,413 $ 235,440 General and administration 4,888 5,598 8,476 10,490 113,648 Foreign exchange loss, net 1,092 169 958 172 9,951 ------------------------------------------------------------------------- Loss before the undernoted (9,716) (16,796) (16,193) (33,075) (359,039) Interest expense on senior convertible notes payable - (304) (5) (787) (1,279) Accretion in carrying value of senior convertible notes payable (36) (2,280) (728) (4,906) (10,294) Amortization of deferred financing costs (9) (950) (154) (1,580) (3,057) Loss on extinguishment of senior convertible notes payable (470) (2,701) (1,754) (2,694) (6,749) Investment income 281 593 633 1,272 12,648 Change in fair value of embedded derivatives 256 - 829 - 829 ------------------------------------------------------------------------- Loss for the period and comprehensive loss (9,694) (22,438) (17,372) (41,770) (366,941) Deficit, beginning of period: As previously reported (360,684) (304,051) (351,374) (284,719) (1,510) Impact of change in accounting policy for financial instruments on December 1, 2006 - - (1,632) - - ----------------------------------------------------------------------- As restated (360,684) (304,051) (353,006) (284,719) (1,510) Charge for acceleration payments on equity component of senior convertible notes payable - (295) - (295) (295) Impact of change in accounting policy for financial instruments on December 1, 2006 - - - - (1,632) ------------------------------------------------------------------------- Deficit, end of period $(370,378) $(326,784) $(370,378) $(326,784) $(370,378) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share $ (0.54) $ (2.59) $ (1.02) $ (4.93) $ - ------------------------------------------------------------------------- ------------------------------------------------------------------------- VASOGEN INC. (A DEVELOPMENT STAGE COMPANY) Interim Consolidated Statements of Cash Flows (In thousands of Canadian dollars) (Unaudited) ------------------------------------------------------------------------- Period from December 1, Three months ended Six months ended 1987 to May 31, May 31, May 31, 2007 2006 2007 2006 2007 ------------------------------------------------------------------------- Cash provided by (used in): Operations: Loss for the period $ (9,694) $ (22,438) $ (17,372) $ (41,770) $(366,941) Items not involving cash: Amortization 127 149 253 298 5,911 Accretion in carrying value of senior convertible notes payable 36 2,280 728 4,906 10,294 Amortization of deferred financing costs 9 950 154 1,580 3,057 Loss on extinguishment of senior convertible notes payable 470 2,701 1,754 2,694 6,749 Change in fair value of embedded derivatives (256) - (829) - (829) Stock-based compensation 890 918 1,453 1,682 13,043 Common shares issued for services - - - - 2,485 Unrealized foreign exchange loss 1,326 676 1,226 706 10,202 Other - - - - (35) Change in non-cash operating working capital (829) (2,504) (4,304) (8,648) 182 ------------------------------------------------------------------------- (7,921) (17,268) (16,937) (38,552) (315,882) Financing: Shares and warrants issued for cash 17,345 - 17,345 - 326,359 Warrants exercised for cash - - - - 16,941 Options exercised for cash - - - - 7,669 Share issue costs (1,443) - (1,440) - (24,646) Issue (repayment) of senior convertible notes payable, net (289) - (924) (2,115) 38,512 Restricted cash 289 382 3,325 686 (3,078) Cash payment on acceleration warrants exercise price - (49) - (49) - Paid to related parties - - - - (234) ----------------------------------------------------------------------- 15,902 333 18,306 (1,478) 361,523 Investments: Purchase of property and equipment (11) (14) (41) (14) (2,457) Purchase of acquired technology - - - - (1,283) Purchases of marketable securities - - - (80) (244,846) Settlement of forward exchange contracts - - 10 (259) (4,824) Maturities of marketable securities - 7,653 - 22,877 240,677 ----------------------------------------------------------------------- (11) 7,639 (31) 22,524 (12,733) Foreign exchange loss on cash held in foreign currency (1,349) (1,221) (1,069) (1,539) (2,212) ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 6,621 (10,517) 269 (19,045) 30,696 Cash and cash equivalents, beginning of period 24,075 41,993 30,427 50,521 - ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 30,696 $ 31,476 $ 30,696 $ 31,476 $ 30,696 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Vasogen Inc.
CONTACT: Glenn Neumann, Investor Relations, 2505 Meadowvale Blvd,Mississauga, ON, Canada, L5N 5S2, tel: (905) 817-2004, fax: (905) 569-9231,www.vasogen.com, investor@vasogen.com
