HMSL Hemosol (MM)

Hemosol Announces Fourth Quarter and Full Year 2004 Financial Results TORONTO, April 1 /PRNewswire-FirstCall/ -- Hemosol Corp. (NASDAQ:HMSLNASDAQ: TSX:NASDAQ:HML) today announced financial results and reviewed operational highlights for the fourth quarter and year ended December 31, 2004. Unless otherwise stated, all dollar amounts presented herein are in Canadian dollars. The Company's net loss fell to $10.1 million or ($0.18) per share for the year ended December 31, 2004 from $34.9 million or ($0.75) per share for the year ended December 31, 2003, a decrease of more than 71%. For the fourth quarter of 2004, Hemosol reduced its loss to $4.5 million or ($0.08) per share versus a net loss of $10.9 million or ($0.22) for the same period of 2003. The substantially narrower losses resulted primarily from cost saving measures implemented in 2003, the recording of future tax recovery and the recording of the $6.8 million net gain realized on the sale of tax losses, which were partially offset by the recording of non-cash stock based compensation expenses of $3.0 million. Total operating expenses for the year ended December 31, 2004 decreased to $18.6 million from $32.1 million for the year ended December 31, 2003, a decrease of $13.5 million. The lowering of operating expenses resulted from the cost savings, referred to above, which reduced the Company's average monthly burn to approximately $1.2 million. "Our success to date with implementing the Cascade and our recent financing demonstrate that Hemosol has made significant headway in executing our therapeutic blood protein and bio-manufacturing initiatives while earning the confidence of our key strategic partners and investors," said Lee Hartwell, President and CEO of Hemosol. "The proceeds from the financing will be used to continue the implementation and operation of the Cascade technology at our Meadowpine facility and commence the clinical trial and regulatory approval process for the initial therapeutic compounds to be produced." Hemosol recently reported that it had successfully scaled-up to the 30-litre pilot scale following completion of both the four-litre development scale and engineering runs. The Company achieved significantly higher protein yields compared to current industry methods. By achieving pilot scale, Hemosol has established a foundation to build toward clinical scale production by the end of the third quarter of 2005. Once clinical scale is reached, Investigational New Drug applications related to the three initial lead proteins will be prepared and filed with the U.S. Food and Drug Administration ("FDA"), followed by clinical development activity and full commercial scale-up of the Cascade process. Late in the third quarter, on September 28, 2004, the Company announced that it had entered into a manufacturing and supply agreement with Organon Canada Ltd. Hemosol will manufacture and sell to Organon human pharmaceutical products, including licensed "Hepalean(R)" products. Hemosol will be the exclusive manufacturer of the Hepalean Products in Canada for Organon. As part of this agreement Hemosol built an aseptic vial filling facility and is on track for inspection and licensing of this facility by Canada's Health Protection Branch and plans to begin shipping product before the end of the second quarter. This filling capability is also central to being able to provide filled plasma products from Cascade for clinical evaluations slated to begin in 2006. Capital Expenditures and Cash Position As a result of securing the Organon contract, modifications were made to Meadowpine to accommodate this revenue generating opportunity. In 2004, Hemosol spent $1.4 million in capital expenditures related to contract manufacturing activities, specifically for a new vial-filling suite. For 2005 the Company plans to spend approximately $1 - $1.5 million in additional capital expenditures. As at December 31, 2004 the Company had $5.2 million of cash and cash-equivalents. Subsequent to year end, on March 31, 2005, Hemosol announced several key developments related to financing its growth, including Hemosol's entrance into agreements for financing transactions to raise aggregate gross proceeds of $13.4 million, the extension of MDS Inc.'s guarantee of Hemosol's $20 million credit facility and the amendment of the Cascade license agreement that will see ProMetic Biosciences Inc. accept a combination of cash and common shares of Hemosol as part of the Cascade licensing fee. More Financial Results Scientific and process development expenses decreased from $10.8 million for the year ended December 31, 2003 to $10.6 million for the year ended December 31, 2004, a decrease of 2%. This decrease was due primarily to the reduced personnel expenses associated with manufacturing and a reduction of drug development activities specifically related to HEMOLINK and is offset by the recording of non-cash stock based compensation expenses of $1.5 million. Regulatory and clinical expenses decreased from $5.8 million for the year ended December 31, 2003 to $1.3 million for the year ended December 31, 2004, a decrease of 78%. This decrease in clinical and regulatory costs result from specific cost savings measures as well as a decrease in site activity due to suspended enrolment in the Company's HEMOLINK clinical trials offset by the recording of stock-based compensation expense of $0.1 million. Administrative expenses decreased from $6.6 million for the year ended December 31, 2003 to $5.1 million for the year ended December 31, 2004, a decrease of 23%. This decrease in administrative costs result from a reduction in salaries, recruitment costs and general consulting expenses offset by the recording of stock-based compensation expense of $1.4 million. Marketing and business development expenses decreased from $1.8 million for the year ended December 31, 2003 to $1.0 million for the year ended December 31, 2004, a decrease of 44%. This decrease was primarily due to a reduction in costs associated with HEMOLINK retained medical education, symposia participation and communication programs focused within the medical community which were offset by business development costs associated with contract manufacturing and pipeline partnering activities. Support services expenses decreased from $1.3 million for the year ended December 31, 2003 to $0.6 million for the year ended December 31, 2004, a decrease of 54%. This decrease was due primarily to salary reductions associated with the cessation of HEMOLINK clinical trials. Amortization of deferred charges decreased from $5.0 million for the year ended December 31, 2003 to $2.2 million for the year ended December 31, 2004, a decrease of 56%. This represents the charge related to the amortization of deferred charges on the Company's $20 million credit facility that was entered into in October 2002. The issuance of the additional 2,000,000 warrants (of which 1,333,333 have vested) allowed the Company to extend the term of the Guarantee from October 21, 2004 to June 20, 2005 and the Credit Facility expiry date from October 1, 2004 to May 25, 2005. Net interest expense increased from $0.5 million for the year ended December 31, 2003 to $0.8 million for the year ended December 31, 2004, an increase of 60%. The change was a result of lower balances in cash and cash-equivalents as well as the Company fully drawing down funds from its $20 million credit facility. Financial Statements to Follow: The following statements should be read in conjunction with the applicable notes, which can be found on SEDAR at http://www.sedar.com/ or the Company's website at http://www.hemosol.com/. Hemosol Corp. (A Development Stage Company) Incorporated under the laws of Ontario CONSOLIDATED BALANCE SHEETS As at December 31 (in thousands of dollars) 2004 2003 $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 4,230 8,125 Cash held in escrow 1,000 448 Prepaids and other assets 366 735 Inventory 1,329 1,274 ------------------------------------------------------------------------- Total current assets 6,925 10,582 ------------------------------------------------------------------------- Property, plant and equipment, net 83,104 83,881 Patents and trademarks, net 1,164 1,368 License technology, net 5,022 2,520 Deferred charges, net 177 2,026 ------------------------------------------------------------------------- 96,392 100,377 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 2,538 3,394 Short-term debt 20,000 20,000 ------------------------------------------------------------------------- Total current liabilities 22,538 23,394 ------------------------------------------------------------------------- Minority interest 5,163 - ------------------------------------------------------------------------- Total liabilities 27,701 23,394 ------------------------------------------------------------------------- Commitments and contingencies Shareholders' equity Common shares 311,711 305,983 Warrants and options 14,080 15,642 Contributed surplus 9,125 8,535 Deficit (266,225) (253,177) ------------------------------------------------------------------------- Total shareholders' equity 68,691 76,983 ------------------------------------------------------------------------- 96,392 100,377 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Hemosol Corp. (A Development Stage Company) CONSOLIDATED STATEMENTS OF LOSS Years ended December 31 (in thousands of dollars except per share data) 2004 2003 2002 $ $ $ ------------------------------------------------------------------------- EXPENSES Research and development Scientific and process 10,605 10,773 15,271 Regulatory and clinical 1,255 5,817 17,173 Administration 5,101 6,586 6,115 Marketing and business development 972 1,760 6,018 Support services 638 1,297 2,602 Write-off of property, plant and equipment - 4,654 - Write-off of patents and trademarks - 846 - Foreign currency translation loss 32 380 246 ------------------------------------------------------------------------- Loss from operations 18,603 32,113 47,425 Amortization of deferred charges 2,150 5,009 1,587 Write-off of deferred charges - - 6,453 Interest income (174) (153) (842) Interest expense 1,004 688 - Net gain on Arrangement (6,838) - - Miscellaneous income - (2,871) - ------------------------------------------------------------------------- Loss before minority interest and income taxes 14,745 34,786 54,623 Minority interest (1,074) - - Provision for (recovery of) income taxes Current 200 156 211 Future (3,723) - - ------------------------------------------------------------------------- (3,523) 156 211 ------------------------------------------------------------------------- Net loss for the year 10,148 34,942 54,834 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share $ 0.18 $ 0.75 $ 1.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding 56,664 46,837 44,514 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF DEFICIT Years ended December 31 (in thousands of dollars) 2004 2003 2002 $ $ $ ------------------------------------------------------------------------- Deficit, beginning of year 253,177 218,235 163,401 Net loss for the year 10,148 34,942 54,834 Distribution 2,900 - - ------------------------------------------------------------------------- Deficit, end of year 266,225 253,177 218,235 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Hemosol Corp. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31 (in thousands of dollars) 2004 2003 2002 $ $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the year (10,148) (34,942) (54,834) Add (deduct) items not involving cash Amortization of property, plant and equipment 2,156 2,276 2,450 Write-off of property, plant and equipment - 4,654 - Amortization of license technology 260 - - Amortization of patents and trademarks 204 134 115 Write-off of patents and trademarks - 846 - Amortization of deferred charges 2,150 5,009 1,587 Write-off of deferred charges - - 6,453 Write-off of inventory - 1,676 - Gain on sale of equipment - (1,100) - Stock-based compensation 2,972 - - Future income taxes (3,723) - - Minority interest (1,074) - - Net gain on Arrangement (6,838) - - Foreign currency translation loss (gain) 31 (79) 52 ------------------------------------------------------------------------- (14,010) (21,526) (44,177) Net change in non-cash working capital balances related to operations (542) (5,129) 3,818 ------------------------------------------------------------------------- Cash used in operating activities (14,552) (26,655) (40,359) ------------------------------------------------------------------------- INVESTING ACTIVITIES Patent and trademark costs - (172) (327) Purchase of license technology (1,502) - - Proceeds on sale of tax losses 12,898 - - Proceeds on sale of equipment - 1,100 - Sale of short-term investments - - 67,052 Purchase of property, plant and equipment (1,379) (8,361) (31,699) ------------------------------------------------------------------------- Cash provided by (used in) investing activities 10,017 (7,433) 35,026 ------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds on issuance of common shares 223 - 22,170 Proceeds on issuance of Series A special warrants - 5,021 - Proceeds on issuance of Series B special warrants - 448 - Proceeds from short-term debt - 20,000 - Payment of share issue costs - (466) (1,351) Payment of debentures - (5,000) - Payment of debt issue costs - - (640) Proceeds on issuance of debentures - - 5,000 Cash put in escrow - (448) (5,000) Cash released from escrow 448 5,000 - ------------------------------------------------------------------------- Cash provided by financing activities 671 24,555 20,179 ------------------------------------------------------------------------- Effect of exchange rates on cash and cash equivalents (31) 79 (52) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the year (3,895) (9,454) 14,794 Cash and cash equivalents, beginning of year 8,125 17,579 2,785 ------------------------------------------------------------------------- Cash and cash equivalents, end of year 4,230 8,125 17,579 ------------------------------------------------------------------------- ------------------------------------------------------------------------- About Hemosol Hemosol is a biopharmaceutical company focused on the development and manufacturing of biologics, particularly blood-related proteins. Hemosol has a broad range of novel therapeutic products in development, including oxygen therapeutics and protein-based therapeutics to treat certain infectious diseases, cancers and anemia. For more information visit Hemosol's website at http://www.hemosol.com/. Hemosol's common shares are listed on the NASDAQ Stock Market under the trading symbol "HMSL" and on the Toronto Stock Exchange under the trading symbol "HML". Certain statements concerning Hemosol's future prospects are "forward- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable securities legislation. There can be no assurances that future results will be achieved, and actual results could differ materially from forecasts and estimates. Important factors that could cause actual results to differ materially from forecasts and estimates include, but are not limited to: Hemosol's ability to successfully implement the Cascade technology and commercialize products derived there from; Hemosol's ability to obtain additional financing; Hemosol's ability to obtain regulatory approvals for its products; Hemosol's ability to successfully complete clinical trials for its products; Hemosol's ability to enter into satisfactory arrangements for the supply of materials used in its manufacturing operations and the sale of resulting products to customers; technical, manufacturing or distribution issues; the competitive environment for Hemosol's products and services; the degree of market penetration of Hemosol's products; Hemosol's ability to attract and retain clients for its bio-manufacturing services; and other factors set forth in filings with Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. These risks and uncertainties, as well as others, are discussed in greater detail in the filings of Hemosol with Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Hemosol makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. DATASOURCE: Hemosol Corp. CONTACT: Jason Hogan, Investor & Media Relations, (416) 361-1331, (800) 789-3419, (416) 815-0080 fax, , http://www.hemosol.com/; Archived images on this organization are searchable through CNW Photo Archive website at http://photos.newswire.ca/. Images are free to accredited members of the media. To request a free copy of this organization's annual report, please go to http://www.newswire.ca/ and click on reports@cnw.

Copyright