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Vasogen Announces Second Quarter 2009 Results
Date:7/14/2009

MISSISSAUGA, ON, July 14 /PRNewswire-FirstCall/ - Vasogen Inc. (NASDAQ: VSGN; TSX:VAS) today reported the results of operations for the three and six months ended May 31, 2009. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.

At May 31, 2009, our cash and cash equivalents totaled $5.8 million, compared with $7.3 million at February 28, 2009. Our net cash used in operating activities for the three and six months ended May 31, 2009, was $1.4 million and $3.2 million, respectively, compared with $7.6 million and $11.0 million for the same periods in 2008. The $1.4 million of net cash used in operating activities for the three months ended May 31, 2009 included the payment of $0.6 million in accounts payable and accrued liabilities that were outstanding as at February 28, 2009 and $0.4 million in one-time payments for our insurance programs which should provide the necessary coverage in the event that our strategic review process results in our Company being sold, merged, acquired, dissolved, or liquidated.

The net loss for the second quarter of 2009 was $1.4 million, or $0.06 per common share, compared with a net loss of $7.4 million, or $0.33 per common share for the same period in 2008. The $1.4 million loss for the three months ended May 31, 2009 included a charge for restructuring costs of $0.5 million, professional fees, mainly related to our ongoing strategic review, of $0.3 million, the amortization of insurance that has been previously paid in the amount of $0.1 million, and a non-cash stock compensation expense of $0.1 million during the second quarter of 2009.

We incurred a net loss for the six months ended May 31, 2009 of $3.3 million, or $0.15 per common share, compared with a net loss of $12.7 million, or $0.57 per common share for the same period in 2008. The loss for the three and six months ended May 31, 2009 has decreased when compared with the same periods in 2008 due to the significant expenditures that were incurred during the 2008 periods to implement the restructuring that was announced on April 14, 2008. A portion of this decrease also relates to a $1.2 million non-cash provision taken against our clinical supplies during the three and six months ended May 31, 2008. This decrease is also the result of a significant reduction in the number of employees and a decision not to incur material expenditures to advance our products during the Company's ongoing strategic review process.

    Corporate Update

    -   To further reduce the rate at which we use our cash during our
        strategic review process, the employment of Graham Neil, our Vice-
        President, Finance, and CFO, was terminated effective July 14, 2009.
        Mr. Neil has agreed to fulfill the role of CFO, in a consulting
        capacity at substantially reduced compensation, to assist the Board
        in bringing closure to the ongoing strategic review process. As a
        result of this termination the number of full-time employees has been
        reduced to one.

    -   On April 24, 2009, we announced that Dr. Eldon R. Smith would succeed
        Terrance H. Gregg as Chairman of our Board of Directors due to the
        retirement of Mr. Gregg. Mr. Gregg's resignation from our Board is
        due to the requirements of his role as President and CEO of DexCom,
        Inc. In connection with his appointment, Dr. Smith's position as our
        Senior Vice President, Scientific Affairs and Chief Medical Officer
        was terminated.

    -   Pursuant to our restructuring plan, our Board of Directors and
        Management had been actively involved in a process of screening,
        reviewing, and short-listing potential opportunities, including the
        sale of the Company or a merger or acquisition, and exploring the
        monetization of certain tangible and intangible assets. The process
        has also included a review of the potential out-licensing of assets,
        lapsing of patents and patent applications, asset divestiture, or
        liquidation of the Company. The process involved narrowing down the
        number of third-party proposals. At this time, we are in the process
        of negotiating agreements that may result in one or more transactions
        with regard to the foregoing. There can be no assurances that we will
        be able to finalize any such agreements. The Board will also consider
        alternatives to these that it has also been evaluating. The Board
        will continue to assess the merits of these options relative to
        liquidating the Company and distributing the remaining cash to the
        shareholders.

The unaudited interim consolidated financial statements, accompanying notes to the unaudited interim consolidated financial statements, and Management's Discussion and Analysis for the three and six months ended May 31, 2009, will be accessible on Vasogen's website at www.vasogen.com and will be available on SEDAR and EDGAR.

Certain statements in this document 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, plans to consider a sale, merger, acquisition, or other alternatives resulting from our strategic review, statements regarding the status of development, or expenditures relating to the Celacade System or our VP series of drugs including VP015 and VP025, plans to fund our current activities, statements concerning our partnering activities, health regulatory submissions, strategy, future operations, future financial position, future revenues and projected costs. 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. 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 our strategic review, securing and maintaining corporate alliances, the need for additional capital and the effect of capital market conditions and other factors, including the current status of our programs, on capital availability, the potential dilutive effects of any financing 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, 2008, as well as in our other public filings, including our Management's Discussion and Analysis for the period ended May 31, 2009. 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.

                 Summary financial tables are provided below.


    VASOGEN INC.
    (A DEVELOPMENT STAGE COMPANY)
    Interim Consolidated Balance Sheets
    (In thousands of Canadian dollars)

                                                              May   November
                                                               31,        30,
                                                             2009       2008
    -------------------------------------------------------------------------
                                                       (Unaudited)
    Assets

    Current assets:
      Cash and cash equivalents                          $  5,834   $  8,556
      Tax credits recoverable                                 427        582
      Prepaid expenses and deposits                           396        188
      -----------------------------------------------------------------------
                                                            6,657      9,326
    Property and equipment                                     14         16
    -------------------------------------------------------------------------
                                                         $  6,671   $  9,342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                                   $    303   $    101
      Accrued liabilities                                     985      1,141
      -----------------------------------------------------------------------
                                                            1,288      1,242
    Shareholders' equity:
      Share capital:
        Authorized:
          Unlimited common shares, without par value
        Issued and outstanding:
          22,623,195 common shares
            (November 30, 2008 - 22,424,719)              365,730    365,677
      Warrants                                             16,725     16,725
      Contributed surplus                                  24,121     23,555
      Deficit                                            (401,193)  (397,857)
      -----------------------------------------------------------------------
                                                            5,383      8,100
    -------------------------------------------------------------------------
                                                         $  6,671   $  9,342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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,
                        2009        2008        2009        2008        2009
    -------------------------------------------------------------------------
    Expenses:
      Research and
       development $     320   $   4,860   $     356   $   7,638   $ 248,067
      General and
       administration    998       2,929       3,444       5,610     128,770
      Foreign
       exchange
       loss (gain)        84        (338)         54        (135)     10,719
    -------------------------------------------------------------------------
    Loss before the
     undernoted       (1,402)     (7,451)     (3,854)    (13,113)   (387,556)

    Interest expense
     on senior
     convertible
     notes payable         -           -           -           -      (1,279)

    Accretion in
     carrying value
     of senior
     convertible
     notes payable         -           -           -           -     (10,294)

    Amortization
     of deferred
     financing
     costs                 -           -           -           -      (3,057)

    Loss on
     extinguishment
     of senior
     convertible
     notes payable         -           -           -           -      (6,749)

    Gain on sale of
     patents               -           -         487           -         487

    Investment income      7          33          31         375      13,869

    Change in fair
     value of
     embedded
     derivatives           -           -           -           -         829
    -------------------------------------------------------------------------

    Loss and
     comprehensive
     loss for the
     period           (1,395)     (7,418)     (3,336)    (12,738)   (393,750)

    Deficit,
     beginning of
     period         (399,798)   (387,103)   (397,857)   (381,783)     (1,510)

    Impact of
     change in
     accounting
     for
     stock-based
     compensation          -           -           -           -      (1,632)

    Impact of
     change in
     accounting
     for financial
     instruments           -           -           -           -      (4,006)

    Charge for
     acceleration
     payments on
     equity
     component of
     senior
     convertible
     notes payable         -           -           -           -        (295)
    -------------------------------------------------------------------------
    Deficit, end
     of period     $(401,193)  $(394,521)  $(401,193)  $(394,521)  $(401,193)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and
     diluted
     loss per
     common
     share         $   (0.06)  $   (0.33)  $   (0.15)  $   (0.57)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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,
                        2009        2008        2009        2008        2009
    -------------------------------------------------------------------------
    Cash provided
     by (used in):

    Operating
     activities:
      Loss for the
       period      $  (1,395)  $  (7,418)  $  (3,336)  $ (12,738)  $(393,750)
      Items not
       involving
       cash:
        Amortization       -         125           2         187       6,379
        Loss on
         disposition
         of property
         and equipment     -           -           -           -         125
        Gain on sale
         of patents        -           -        (487)          -        (487)
        Accretion in
         carrying
         value of
         senior
         convertible
         notes
         payable           -           -           -           -      10,294
        Amortization
         of deferred
         financing
         costs             -           -           -           -       3,057
        Loss on
         extinguishment
         of senior
         convertible
         notes payable     -           -           -           -       6,749
        Change in
         fair value
         of embedded
         derivatives       -           -           -           -        (829)
        Stock-based
         compensation    150         316         566         551      10,956
        Common
         shares
         issued for
         services          -           -           -           -       2,485
        Unrealized
         foreign
         exchange
         gain (loss)      90         (33)         52         159      11,471
        Other              -           -           -           -         (35)
      Change in
       non-cash
       operating
       working
       capital          (257)       (557)         42         841         480
      -----------------------------------------------------------------------
                      (1,412)     (7,567)     (3,161)    (11,000)   (343,105)

    Financing
     activities:
      Shares and
       warrants
       issued for
       cash                -           -           -           -     326,358
      Warrants
       exercised
       for cash            -           -           -           -      16,941
      Options
       exercised
       for cash            -           -           -           -       7,669
      Share issue
       costs               -           -           -           -     (24,646)
      Repayment
       of senior
       convertible
       notes
       payable, net        -           -           -           -      38,512
      Paid to
       related
       parties             -           -           -           -        (234)
      -----------------------------------------------------------------------
                           -           -           -           -     364,600

    Investing
     activities:
      Purchases
       of property
       and
       equipment           -          (6)          -          (6)     (2,471)
      Purchases of
       acquired
       technology          -           -           -           -      (1,283)
      Proceeds on
       disposition
       of patents          -           -         487           -         487
      Purchases of
       marketable
       securities          -           -           -           -    (244,846)
      Proceeds on
       disposition
       of property
       and
       equipment           -           -           -           -          62
      Settlement
       of forward
       foreign
       exchange
       contracts           -           -           -           -      (4,824)
      Maturities
       of
       marketable
       securities          -           -           -           -     240,677
      -----------------------------------------------------------------------
                           -          (6)        487          (6)    (12,198)

    Foreign exchange
     gain (loss) on
     cash held in
     foreign
     currency            (87)         32         (48)       (150)     (3,463)
    -------------------------------------------------------------------------

    Increase
     (decrease) in
     cash and cash
     equivalents      (1,499)     (7,541)     (2,722)    (11,156)      5,834

    Cash and cash
     equivalents,
     beginning of
     period            7,333      19,930       8,556      23,545           -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period $   5,834   $  12,389   $   5,834   $  12,389   $   5,834
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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SOURCE Vasogen Inc.
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