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Vasogen Announces Third Quarter 2007 Results

MISSISSAUGA, ON, Oct. 9 /PRNewswire-FirstCall/ - Vasogen Inc. (NASDAQ:VSGN; TSX:VAS), today reported the results of operations for the third quarter of 2007. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.

At August 31, 2007, our cash and cash equivalents and restricted cash totaled $29.1 million, compared with $33.8 million at May 31, 2007. With the repayment of our convertible notes during the second quarter, we no longer have any restricted cash. The change in our cash position resulted mainly from cash used for operations. Our net cash used for operations for the three months ended August 31, 2007, was $4.4 million.

The net loss for the third quarter of 2007 was $5.3 million, or $0.24 per common share, compared with a net loss of $14.6 million, or $1.55 per common share for the same period in 2006. We incurred a net loss for the nine months ended August 31, 2007 of $22.7 million, or $1.21 per common share, compared with a net loss of $56.3 million, or $6.41 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 which has been partially offset by restructuring costs. The difference between cash used in operations and our accounting loss is driven by non-cash items, such as expenses related to our senior convertible notes and stock options, as well as unrealized foreign exchange gains and losses.


- Following our meeting with the Food and Drug Administration (FDA) in

May 2007 regard-------------------------

Loss for the period

and comprehensive

loss (5,347) (14,566) (22,719) (56,336) (372,288)

Deficit, beginning of


As previously

reported (370,378) (326,784) (351,374) (284,719) (1,510)

Impact of change

in accounting for


instruments on

December 1, 2006 - - (1,632) - (1,632)


As restated (370,378) (326,784) (353,006) (284,719) (3,142)

Charge for


payments on equity

component of senior

convertible notes

payable - - - (295) (295)


Deficit, end of

period $(375,725) $(341,350) $(375,725) $(341,350) $(375,725)



Basic and diluted

loss per share $ (0.24) $ (1.55) $ (1.21) $ (6.41) $ -





Interim Consolidated Statements of Cash Flows

(In thousands of Canadian dollars)



Period from

December 1,

Three months ended Nine months ended 1987 to

August 31, August 31, August 31,

2007 2006 2007 2006 2007


Cash provided by

(used in):


Loss for the

period $ (5,347) $ (14,566) $ (22,719) $ (56,336) $(372,288)

Items not

involving cash:

Amortization 125 146 378 444 6,034

Accretion in

carrying value

of senior


notes payable - 1,727 728 6,633 10,294

Amortization of


financing costs - 577 154 2,157 3,057

Loss on


of senior


notes payable - 1,407 1,754 4,101 6,749

Change in fair

value of


derivatives - - (829) - (829)


compensation 164 774 1,615 2,456 13,207

Common shares

issued for

services - 28 - 28 2,485



exchange loss

(gain) 227 (121) 1,454 585 10,431

Other - - - - (35)

Change in


operating working

capital 413 (5,184) (3,890) (13,832) 595


(4,418) (15,212) (21,355) (53,764) (320,300)


Shares and warrants

issued for cash - - 17,345 - 326,358

Warrants exercised

for cash - - - - 16,941

Options exercised

for cash - - - - 7,669

Share issue costs - (160) (1,440) (160) (24,646)

Issue (repayment)

of senior

convertible notes

payable, net - (1,695) (924) (3,810) 38,561

Restricted cash 3,078 (38) 6,403 648 -

Cash payment on


warrants exercise

price - - - (49) (49)

Paid to related

parties - - - - (234)


3,078 (1,893) 21,384 (3,371) 364,600


Purchase of

property and

equipment (8) (10) (49) (24) (2,465)

Purchase of


technology - - - - (1,283)

Purchases of


securities - - - (80) (244,846)

Settlement of

forward exchange

contracts - - 10 (259) (4,824)

Maturities of


securities - - - 22,877 240,677


(8) (10) (39) 22,514 (12,741)

Foreign exchange

gain (loss) on cash

held in foreign

currency (227) 205 (1,296) (1,334) (2,438)


Increase (decrease)

in cash and cash

equivalents (1,575) (16,910) (1,306) (35,955) 29,121

Cash and cash


beginning of period 30,696 31,476 30,427 50,521 -


Cash and cash

equivalents, end

of period $ 29,121 $ 14,566 $ 29,121 $ 14,566 $ 29,121



ing our ACCLAIM results, the agency strongly

recommended that we conduct a confirmatory trial ("ACCLAIM-II") of

Celacade in NYHA Class II heart failure patients to support a

Pre-market Approval submission for the purpose of achieving

regulatory approval in the United States. The FDA also recommended

that we use a Bayesian approach in the design of the confirmatory

trial. The FDA indicated that they were recommending this approach

specifically because it would allow us to borrow power from the

ACCLAIM trial and also because it has the potential to substantially

reduce the sample size required for a confirmatory study. The planned

trial design for ACCLAIM-II indicates that as few as 300 patients

could provide sufficient data to confirm the finding of the

phase III ACCLAIM trial which demonstrated a 39% reduction

(p=0.0003) in the risk of death or cardiovascular

hospitalizations for patients receiving Celacade in the large

pre-specified subgroup of 689 NYHA class II heart failure patients.

Furthermore, the use of an adaptive clinical trial design also

provides the flexibility to increase the sample size up to

600 patients, should additional data be required. We are preparing to

meet with the FDA again, with the objective of obtaining formal

regulatory agreement with respect to our proposed trial design prior

to the end of the year.

- James B. Young, MD, Chairman, Division of Medicine at the Cleveland

Clinic Foundation and Medical Director, Kaufman Center for Heart

Failure, has agreed to be the Global Principal Investigator and

Chairman of the Steering Committee for the planned ACCLAIM-II study.

Dr. Young, who has played a leading role in numerous multi-center

clinical trials focusing on heart failure and transplantation, led

Vasogen's 2,400-patient ACCLAIM study, which was completed last year.

We are also pleased to announce the other members of the newly formed

ACCLAIM-II steering committee include Guillermo Torre-Amione, MD,

PhD, FACC, Medical Director, Heart Transplant Program, Methodist

DeBakey Heart Center at The Methodist Hospital; Robert Bourge, MD,

Professor & Director of Cardiology Division, Department of Medicine,

University of Alabama at Birmingham; Jean Rouleau, MD, Dean of

Medicine, University of Montreal; Maria Rosa Costanzo, MD, Medical

Director, Edward Center for Heart Failure, Midwest Heart Foundation;

Clyde W. Yancy Jr., MD, Medical Director, Baylor Heart & Vascular

Institute; and Mariell Jessup, MD, Medical Director, Hospital of the

University of Pennsylvania, Heart Failure/Transplant Center.

- A medical symposium focused on the introduction of our

Celacade technology into the European Union was recently held during

the 11th National Conference of Advanced Therapies in Heart Failure

in Spain. The symposium, which was hosted by our European

commercialization partner, Grupo Ferrer Internacional, S.A.

("Ferrer"), was attended by physicians whom Ferrer is targeting to

participate in the initial roll-out of our Celacade technology for

the treatment of heart failure patients. Ferrer is initially

targeting Germany and Spain for the initial commercial launch of

Celacade. Among the presenters at the symposium was Dr. Torre-Amione,

who discussed the importance of the role inflammation plays in the

development and progression of heart failure, and who also reviewed

the results of the ACCLAIM trial of Celacade in chronic heart

failure. The European commercialization activities for Celacade are

proceeding as planned and we remain on track with our objective of

launching Celacade in Europe before the end of the year.

- Today we announced that a recently published book,

"Immune Dysfunction and Immunotherapy in Heart Disease," discusses

the Celacade System for the treatment of heart failure. The chapter

entitled "Anti-inflammatory therapy in heart failure," describes how

the growing understanding of the role inflammation in heart failure

has led to new treatment modalities and describes the potential of

Celacade to target this underlying pathology. The authors of the

chapter describe the mechanism of action of Celacade and review the

results of the ACCLAIM trial. Regarding the results of the trial, the

authors state: "These findings are consistent with the role that

chronic inflammation plays in the development and progression of HF

and are particularly impressive in the large subgroup of

NYHA Class III or IV patients who had not experienced a prior heart

attack and in all NYHA class II patients. These results provide a

strong basis for targeting Celacade's novel anti-inflammatory

mechanism in this large and well-defined patient population."

As previously announced, a conference call will be conducted on October 9, 2007, at 4:30 p.m. Eastern time. The conference call may be accessed by calling 416-641-6124 or 1-866-300-4047 ten minutes prior to the call. An audio web cast of the event will also be available at A re-broadcast of the conference call may be accessed by calling 416-695-5800 or 1-800-408-3053, PIN code 3238234 followed by the number sign, and will also be available at

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) System, is designed to activate the immune response to apoptosis - an important physiological process that regulates inflammation. Celacade 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. VP025 is the lead drug candidate from this new class.

Certain statements contained in this press release, the upcoming conference call and web cast, 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, plans to advance the development of Celacade(TM) or 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, 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. 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 trials, 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.

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 nine months ended August 31, 2007, will be accessible on Vasogen's Website at and will be available on SEDAR and EDGAR. Summary financial tables are provided below.



Interim Consolidated Balance Sheets

(In thousands of Canadian dollars)


August 31, November 30,

2007 2006




Current assets:

Cash and cash equivalents $ 29,121 $ 30,427

Restricted cash - 6,403

Clinical supplies 1,241 1,211

Tax credits recoverable 1,356 1,327

Prepaid expenses and deposits 583 1,384


32,301 40,752

Property and equipment 476 615

Acquired technology 63 253

Deferred financing costs - 150


$ 32,840 $ 41,770



Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $ 537 $ 3,369

Accrued liabilities 3,267 5,067

Senior convertible notes payable - 8,754


3,804 17,190

Shareholders' equity:

Share capital:


Unlimited common shares, without par value

Issued and outstanding:

22,391,387 common shares

(November 30, 2006 - 15,665,134) 365,670 344,217

Stock-based compensation 10,958 10,713

Equity component of senior convertible

notes payable - 1,639

Warrants 16,725 11,390

Contributed surplus 11,408 7,995

Deficit (375,725) (351,374)


29,036 24,580

Commitments and contingencies


$ 32,840 $ 41,770





Interim Consolidated Statements of Operations, Deficit and Comprehensive


(In thousands of Canadian dollars, except per share amounts)



Period from

December 1,

Three months ended Nine months ended 1987 to

August 31, August 31, August 31,

2007 2006 2007 2006 2007



Research and

development $ 2,588 $ 7,360 $ 9,347 $ 29,773 $ 238,028

General and

administration 2,887 3,800 11,363 14,290 116,535

Foreign exchange

loss (gain), net 242 (12) 1,200 160 10,193


Loss before the

undernoted (5,717) (11,148) (21,910) (44,223) (364,756)

Interest expense on

senior convertible

notes payable - (116) (5) (903) (1,279)

Accretion in

carrying value of

senior convertible

notes payable - (1,727) (728) (6,633) (10,294)

Amortization of

deferred financing

costs - (577) (154) (2,157) (3,057)

Loss on

extinguishment of

senior convertible

notes payable - (1,407) (1,754) (4,101) (6,749)

Investment income 370 409 1,003 1,681 13,018

Change in fair value

of embedded

derivatives - - 829 - 829


SOURCE Vasogen Inc.
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