Hemosol Corp. Announces Second Quarter 2004 Financial Results
TORONTO, Aug. 9 /PRNewswire-FirstCall/ -- Hemosol Corp.
(NASDAQ:HMSLNASDAQ: TSX:NASDAQ:HML) today announced financial
results and reviewed operational highlights for the second quarter
and six-month period ended June 30, 2004. The quarterly and
year-to-date financial results of Hemosol Corp. are compared with
those of its predecessor, Hemosol Inc., which was subsequently
renamed LPBP Inc. after the completion of a Plan of Arrangement
involving Hemosol Inc., its shareholders and MDS Inc. ("MDS"). All
amounts are expressed in Canadian currency unless otherwise stated.
For the second quarter ended June 30, 2004 the company had net
income of $2.9 million, or $0.05 per share, compared with a net
loss for the quarter ended June 30, 2003 of $9.6 million, or
($0.21) per share. The net income resulted from the Company
concluding an agreement with MDS, involving a reorganization of its
business, which generated gross proceeds of $16 million, and from a
cost savings plan implemented in April 2003. Net loss for the first
six months of 2004 was $2.1 million, or ($0.04) per share, compared
with $20.0 million, or ($0.43) per share, for the same period in
the prior year. "During the quarter, Hemosol focused on negotiating
and completing agreements to formalize key relationships that will
drive the Company's growth strategy in the near future," said Lee
Hartwell, President and Chief Executive Officer of Hemosol.
"Completion of the reorganization has provided us with the
financial flexibility to proceed with a series of value-creation
initiatives that we believe will allow us to leverage the
Meadowpine manufacturing facility and further develop our pipeline
of oxygen therapeutics and drug delivery technologies." On April
30, 2004, subsequent to court and shareholder approval, the Company
concluded an agreement (the "Arrangement") with MDS, a related
party, under which the Company, through a reorganization of the
Company's business and certain MDS diagnostic assets, exchanged a
significant portion of its existing accumulated future tax assets
in exchange for a $16 million ($13.9 million after transaction
expenses) cash infusion. This cash infusion allows the Company to
pursue multiple strategic opportunities, including the further
development of HEMOLINK(TM) (hemoglobin raffimer) and other blood
product candidates, as well as advance the implementation of the
strategic alliance with ProMetic and the American National Red
Cross ("American Red Cross"). After completion of the Plan of
Arrangement, Hemosol Corp. became the successor to Hemosol Inc.
(which was subsequently renamed LPBP Inc.) In early June, Hemosol
announced that it had entered into definitive license and strategic
alliance agreements with ProMetic Biosciences Inc. a subsidiary of
ProMetic Life Sciences Inc. (TSX: PLI) ("ProMetic"), to license the
Cascade technology developed by ProMetic and its strategic partner,
the American Red Cross, for the separation of valuable therapeutic
proteins from human plasma. Hemosol is currently integrating the
Cascade technology into its state-of-the-art Meadowpine facility
and intends, upon completion, to sell the resulting products to
customers, including the American Red Cross. The American Red Cross
has committed in principle to supply plasma to Hemosol and
subsequently purchase therapeutic products isolated using the
Cascade technology. Under the license Hemosol will have the right
to the Cascade technology to manufacture therapeutic products from
plasma on an exclusive basis in North America. The Company is
currently negotiating a supply and purchase agreement with the
American Red Cross. As a result of the strategic alliance
agreement, ProMetic and Hemosol have also agreed to work together
to generate revenues in the short term through technology transfer
support and the supply of clinical trial material to other
forthcoming licensees of ProMetic outside of North America. More
Financial Results The Company's operating expenses consist of
research and development expenses, marketing and business
development, administration and support services expenses. Total
operating expenses for the quarter ended June 30, 2004 decreased to
$4.5 million from $8.1 million for the quarter ended June 30, 2003
(a decrease of 44%), bringing operating expenses for the six months
ended June 30, 2004 to $8.0 million compared with $17.3 million for
the same period in the prior year. The decrease in operating
expenses, offset by stock based compensation expenses of $1.1
million, resulted primarily from a cost savings plan implemented in
April 2003, which reduced the monthly burn-rate by approximately
$2.0 million to the current average monthly burn-rate of
approximately $1.2 million. Specifically, costs associated with
science and process development, market and business development,
support services and administration were significantly reduced
during the period. The Company's burn rate is expected to fluctuate
with milestone payments to ProMetic, under the terms of the
definitive license and strategic alliance agreement, and the
delivery and timing of potential biomanufacturing services. The
cash used in operating activities for the three month period ended
June 30, 2004 decreased from $9.4 million for the quarter ended
June 30, 2003 to $3.3 million for the quarter ended June 30, 2004,
a decrease of 65%. Cash used in operating activities for the six
months ended June 30, 2004 decreased to $8.2 million compared with
$21.1 million for the same period in the prior year. The
significant decrease was also a result of restructuring measures
implemented in April 2003. Specifically, a reduction in costs
associated with the development of HEMOLINK. As of June 30, 2004
the Company had $11.7 million of cash and cash-equivalents and
short-term investments and a further $1 million held in escrow
related to the reorganization. Outlook Hemosol expects to finish
integrating the Cascade technology at its Meadowpine facility over
the coming months and be in a position to manufacture and sell
clinical material by the end of 2005. Commercial scale
implementation would follow, subject to advance approval of the
applicable regulatory agency in each jurisdiction where sales are
completed, with full-scale commercial revenue anticipated to begin
in late 2007 or early 2008. In addition to meeting its obligations
under the aforementioned agreements, Hemosol will continue its work
on other key corporate initiatives for the balance of 2004. One of
the most important is to determine the clinical path forward for
HEMOLINK, the company's core oxygen therapeutic product. Hemosol
has worked diligently to address the issues that led to the
suspension of clinical trials with the objective of establishing
the clinical path forward for HEMOLINK by the end of this year.
Hemosol's R&D team will continue its work in the
bio-conjugation and cell expansion areas to develop both a
hemoglobin-based drug delivery platform and a portfolio of novel
therapeutics to stimulate the growth of blood cells. An active
program is underway to pursue partnering and licensing
opportunities to continue to advance the development of these
products. About Hemosol Hemosol is a biopharmaceutical company
focused on the development and manufacturing of biologics,
particularly blood-related proteins. Hemosol is leveraging its
expertise in manufacturing blood proteins and its state-of-the-art
Meadowpine manufacturing facility to seek additional strategic
growth opportunities. Hemosol has a broad range of novel
therapeutic products in development, including HEMOLINK(TM)
(hemoglobin raffimer), an oxygen therapeutic designed to rapidly
and safely improve oxygen delivery via the circulatory system.
Hemosol is also developing next generation oxygen therapeutics, a
hemoglobin-based drug delivery platform to treat diseases such as
hepatitis C and liver cancers, and a cell therapy program initially
directed to the treatment of cancer. 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 obtain regulatory approvals for its products; Hemosol's
ability to successfully complete clinical trials for its products
and 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; the degree of market penetration of Hemosol's products;
Hemosol's ability to obtain sufficient financing to complete
clinical development of its products; 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. Financial Statements to follow.
HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) - INCORPORATED UNDER THE
LAW OF ONTARIO CONSOLIDATED BALANCE SHEETS (unaudited) See Note 1b-
Basis of Presentation June, 30 December, 31 2004 2003 (THOUSANDS OF
CANADIAN DOLLARS)
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ASSETS Current Cash and cash equivalents 4,765 8,125 Cash held in
escrow (notes 4d and 5) 1,000 448 Short-term investments (note 2)
6,965 - Prepaids and other assets 1,004 735 Inventory 1,257 1,274
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Total current assets 14,991 10,582
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Property, plant and equipment, net 83,026 83,881 Patents and
trademarks, net 1,304 1,368 License technology, net (note 6) 5,195
2,520 Deferred charges, net - 2,026
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Total other assets 89,525 89,795
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104,516 100,377
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LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued
liabilities 1,670 3,394 Short-term debt 20,000 20,000
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Total current liabilities 21,670 23,394
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Long term liabilities Minority interest (note 4a) 5,981 - Future
tax liability (note 4b) 2,694 - Total long term liabilities 8,675 -
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30,345 23,394
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Shareholders' equity Common shares (note 6) 311,668 305,983
Warrants and options (notes 3 and 6) 11,521 15,642 Contributed
surplus (note 4c) 9,125 8,535 Deficit (258,143) (253,177)
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Total shareholders' equity 74,171 76,983
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104,516 100,377
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See accompanying notes HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) -
INCORPORATED UNDER THE LAW OF ONTARIO CONSOLIDATED STATEMENTS OF
LOSS (INCOME) (unaudited) 3 MONTHS 6 MONTHS PERIOD ENDED PERIOD
ENDED (THOUSANDS OF CANADIAN DOLLARS June 30 June 30 June 30 June
30 EXCEPT FOR SHARE DATA) 2004 2003 2004 2003
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EXPENSES Research and development (note 3) Scientific and process
2,657 2,225 4,761 5,713 Regulatory and clinical 364 1,854 663 4,760
Administration (note 3) 1,340 2,566 2,169 3,687 Marketing and
business development 43 542 150 1,422 Support services 77 843 261
1,427 Foreign currency translation loss 18 69 9 285
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Loss from operations before the following 4,499 8,099 8,013 17,294
Amortization of deferred charges 434 1,271 1,687 2,495 Interest
income (51) - (87) - Interest expense 243 254 506 222 Net gain on
Arrangement (note 4d) (6,838) - (6,838) - Miscellaneous expense
(income) 19 - (30) -
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Loss (income) before income taxes (1,694) 9,624 3,251 20,011
Minority interest (256) - (256) - Provision for income taxes
Current 50 - 100 - Future (1,029) - (1,029) -
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Net loss (income) for the period (2,929) 9,624 2,066 20,011
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Basic and diluted loss (income) per share (0.05) 0.21 0.04 0.43
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Weighted average number of common shares outstanding (000's) 56,453
46,103 56,163 46,103
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See accompanying notes HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) -
INCORPORATED UNDER THE LAW OF ONTARIO CONSOLIDATED STATEMENTS OF
DEFICIT (unaudited) 3 MONTHS 6 MONTHS PERIOD ENDED PERIOD ENDED
(THOUSANDS OF CANADIAN DOLLARS June 30 June 30 June 30 June 30
EXCEPT FOR SHARE DATA) 2004 2003 2004 2003
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Deficit, beginning of period 258,172 251,148 253,177 240,761 Net
loss (income) for the period (2,929) 9,624 2,066 20,011
Distribution (note 4c) 2,900 - 2,900 -
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Deficit, end of period 258,143 260,772 258,143 260,772
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See accompanying notes HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) -
INCORPORATED UNDER THE LAW OF ONTARIO CONSOLIDATED STATEMENT OF
CASH FLOWS (unaudited) 3 MONTHS 6 MONTHS PERIOD ENDED PERIOD ENDED
(THOUSANDS OF CANADIAN DOLLARS June 30 June 30 June 30 June 30
EXCEPT FOR SHARE DATA) 2004 2003 2004 2003
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OPERATING ACTIVITIES Net income (loss) for the period 2,929 (9,624)
(2,066) (20,011) Add (deduct) items not involving cash Amortization
of property plant and equipment 567 604 1,110 1,207 Amortization of
license technology 42 - 84 - Amortization of patents and trademarks
41 24 70 49 Amortization of deferred charges 434 1,271 1,687 2,495
Stock based compensation (note 3) 1,053 - 1,053 - Future tax
liability (1,029) - (1,029) - Minority interest (256) - (256) - Net
gain on Arrangement (note 4d) (6,838) - (6,838) - Foreign currency
translation (gain) loss (8) 69 - 285
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(3,065) (7,656) (6,185) (15,975) Net changes in non-cash working
capital balances related to operations (282) (1,710) (1,975)
(5,126)
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Cash used in operating activities (3,347) (9,366) (8,160) (21,101)
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INVESTING ACTIVITIES Patent and trademark costs (4) (52) (6) (95)
Purchase of capital assets (125) (6,327) (255) (8,160) Purchase of
license technology (note 6) (1,500) - (1,500) - Proceeds from
Arrangement, net of transaction costs (note 4d) 12,898 - 12,898 -
Purchase of short term investments (note 2) (6,965) - (6,965) -
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Cash provided by (used in) investing activities 4,304 (6,379) 4,172
(8,255)
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FINANCING ACTIVITIES Proceeds on issuance of common shares (note 6)
- - 180 - Proceeds from loan (note 5) - 3,000 - 13,000 Cash
released from escrow - - 448 - Deferred charges - - - (29)
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Cash provided by financing activities - 3,000 628 12,971
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Effect of exchange rates on cash 8 (69) - (285)
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Net increase (decrease) in cash and cash equivalents during the
period 965 (12,814) (3,360) (16,670) Cash and cash equivalents,
beginning of period 3,800 13,723 8,125 17,579
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Cash and cash equivalents, end of period 4,765 909 4,765 909
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See accompanying notes 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 available through CNW E-Pix at
http://www.newswire.ca/. Images are free to members of The Canadian
Press. To request a free copy of this organization's annual report,
please go to http://www.newswire.ca/ and click on reports@cnw.
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