HMSL Hemosol (MM)

Hemosol Corp. Announces Third Quarter 2004 Financial Results TORONTO, Nov. 1 /PRNewswire-FirstCall/ -- Hemosol Corp. (NASDAQ:HMSLNASDAQ: TSX:NASDAQ:HML) today announced financial results and reviewed operational highlights for the third quarter and nine-months ended September 30, 2004. The quarterly and year-to-date financial results of Hemosol Corp. are compared to those of its predecessor, Hemosol Inc., subsequently renamed LPBP Inc. after the completion of a Plan of Arrangement involving Hemosol Inc., its shareholders and MDS Inc. All amounts are expressed in Canadian currency unless otherwise stated. During the third quarter of 2004 Hemosol Corp. had a net loss of $3.6 million, or ($0.06) per share, compared to a net loss of $4.0 million, or ($0.09) per share, in the same period of 2003. The net loss for the nine months ended September 30, 2004 was $5.7 million ($0.10 per share) versus $24.0 million ($0.52 per share) in the prior year. The decreased net loss for the three month period ended September 30, 2004 resulted from the recording of the future tax liability as a result of the Plan of Arrangement which was offset by non-cash stock based compensation expenses of $1.4 million. The decreased net loss for the nine months ended September 30, 2004, resulted primarily from cost savings measures implemented in 2003 and the recording of the future tax liability of $3.0 million which was offset by non-cash stock-based compensation expenses of $2.5 million. "During the third quarter we continued to make progress in implementing the Cascade technology at our Meadowpine facility," said Lee Hartwell, President and Chief Executive Officer of Hemosol. "We expect to be in a position to manufacture and sell clinical material by the end of 2005. In the meantime we have finalized a contract manufacturing agreement with Organon Canada, which will allow us to begin generating revenue earlier in 2005." Organon Canada is the pharmaceutical division of Akzo Nobel. The agreement, signed in early September, represents another major step in the Company's strategy to leverage its Meadowpine facility and bio-manufacturing expertise to produce high value biopharmaceutical products and more specifically validate the Company's experience and capability in the area of biologics manufacturing. As a result of this agreement, the Company has acquired a vial filling line to produce "Hepalean(R)" products for Organon. This vial filing line will also support the clinical stage of the Company's previously announced strategic alliance with ProMetic and the American Red Cross. Revenue from the Organon agreement is expected to contribute to reducing the Company's burn rate beginning in 2005. Hemosol has entered into definitive license and strategic alliance agreements with ProMetic Life Sciences Inc. ("ProMetic"), for the separation of valuable therapeutic proteins from human plasma. Hemosol is currently integrating the novel Cascade technology, developed by Prometic and the American Red Cross 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. HEMOLINK Update Hemosol is nearing the completion of a series of non-clinical studies on HEMOLINK(TM) (hemoglobin raffimer). Based on the strength of these studies the next step will be to request a meeting with the U.S. Food & Drug Administration to define the future clinical path for HEMOLINK. In addition to the ongoing analysis of data related to HEMOLINK, the Company continues to pursue a number of strategic opportunities with respect to the advancement of its pipeline of oxygen therapeutics and drug delivery and cell therapy programs as well as other opportunities related to the utilization of Meadowpine. Further Financial Results Total operating expenses for the quarter ended September 30, 2004 increased by 30% to $5.6 million from $4.3 million for the quarter ended September 30, 2003 bringing operating expenses for the nine months ended September 30, 2004 to $13.6 million compared with $21.6 million for the same period in the prior year. The decrease in operating expenses, partially offset by non-cash stock based compensation expenses of $2.5 million, resulted primarily from a cost savings plan implemented in April 2003, which reduced the average monthly cash used in operating expenses by approximately $2.0 million to the current average monthly cash used in operating expenses of approximately $1.2 million. The increase in operating expenses in the quarter resulted from non-cash stock based compensation expenses of $1.4 million. The cash used in operating activities for the three-month period ended September 30, 2004 increased 31% to $3.4 million from $2.6 million for the quarter ended September 30, 2003. In spite of this quarterly increase, the cash used in operating activities for the nine months ended September 30, 2004 was $11.6 million compared to $23.7 million for the same period in the prior year. The significant decrease was a result of restructuring measures implemented in April 2003, specifically, a reduction in cost expenditures associated with HEMOLINK activity. As of September 30, 2004 the Company had $8.2 million of cash and cash- equivalents and a further $1 million held in escrow related to the Plan of Arrangement. The Company expects that its average cash used in operating expenses for the fourth quarter of 2004 will be approximately $1.3 million per month. The Company expects that its cash resources will be sufficient to fund anticipated operating and capital expenditures into the second quarter of 2005, exclusive of milestone payments due under the ProMetic license agreement. 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; 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; 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) September, 30 December, 31 (THOUSANDS OF CANADIAN DOLLARS) 2004 2003 ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 8,154 8,125 Cash held in escrow 1,000 448 Prepaids and other assets 822 735 Inventory 1,232 1,274 ------------------------------------------------------------------------- Total current assets 11,208 10,582 ------------------------------------------------------------------------- Property, plant and equipment, net 82,659 83,881 Patents and trademarks, net 1,274 1,368 License technology, net 5,095 2,520 Deferred charges, net 285 2,026 ------------------------------------------------------------------------- Total other assets 89,313 89,795 ------------------------------------------------------------------------- 100,521 100,377 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities 1,830 3,394 Short-term debt 20,000 20,000 ------------------------------------------------------------------------- Long term loan payable Total current liabilities 21,830 23,394 ------------------------------------------------------------------------- Long term liabilities Minority interest 5,557 - Future tax liability 748 - ------------------------------------------------------------------------- Total long term liabilities 6,305 - ------------------------------------------------------------------------- 28,135 23,394 ------------------------------------------------------------------------- Shareholders' equity Common shares 311,668 305,983 Warrants and options 13,332 15,642 Contributed surplus 9,125 8,535 Deficit (261,739) (253,177) ------------------------------------------------------------------------- Total shareholders' equity 72,386 76,983 ------------------------------------------------------------------------- 100,521 100,377 ------------------------------------------------------------------------- ------------------------------------------------------------------------- HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) - INCORPORATED UNDER THE LAW OF ONTARIO CONSOLIDATED STATEMENTS OF LOSS (unaudited) (THOUSANDS OF CANADIAN DOLLARS 3 MONTHS PERIOD ENDED 9 MONTHS PERIOD ENDED EXCEPT FOR September 30 September 30 September 30 September 30 SHARE DATA) 2004 2003 2004 2003 ------------------------------------------------------------------------- EXPENSES Research and development Scientific and process 3,298 1,847 7,905 7,560 Regulatory and clinical 354 704 1,007 5,464 Administration 1,446 1,349 3,614 5,036 Marketing and business development 284 125 597 1,547 Support services 224 251 485 1,678 Foreign currency translation loss (gain) (3) (2) 6 283 ------------------------------------------------------------------------- Loss from operations before the following 5,603 4,274 13,614 21,568 Amortization of deferred charges 115 1,252 1,823 3,747 Interest income (44) - (128) - Interest expense 242 226 746 448 Stock option expense - - - Deferred taxes - - - - Net gain on Arrangement - - (6,838) - Miscellaneous income - (1,768) (50) (1,768) ------------------------------------------------------------------------- Loss before income taxes and minority interest 5,916 3,984 9,167 23,995 Minority interest (424) - (680) - Provision for (recovery) of income taxes - Current 50 - 150 - Future (1,946) - (2,975) - ------------------------------------------------------------------------- Net loss for the period 3,596 3,984 5,662 23,995 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share 0.06 0.09 0.10 0.52 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding (000's) 57,146 46,103 56,493 46,103 ------------------------------------------------------------------------- ------------------------------------------------------------------------- HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) - INCORPORATED UNDER THE LAW OF ONTARIO CONSOLIDATED STATEMENTS OF DEFICIT (unaudited) (THOUSANDS OF CANADIAN DOLLARS 3 MONTHS PERIOD ENDED 9 MONTHS PERIOD ENDED EXCEPT FOR September 30 September 30 September 30 September 30 SHARE DATA) 2004 2003 2004 2003 ------------------------------------------------------------------------- Deficit, beginning of period 258,143 260,772 253,177 240,761 Net loss for the period 3,596 3,984 5,662 23,995 Distribution - - 2,900 - ------------------------------------------------------------------------- Deficit, end of period 261,739 264,756 261,739 264,756 ------------------------------------------------------------------------- ------------------------------------------------------------------------- HEMOSOL CORP (A DEVELOPMENT STAGE COMPANY) - INCORPORATED UNDER THE LAW OF ONTARIO CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) 3 MONTHS PERIOD ENDED 9 MONTHS PERIOD ENDED (THOUSANDS OF September 30 September 30 September 30 September 30 CANADIAN DOLLARS) 2004 2003 2004 2003 ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (3,596) (3,984) (5,662) (23,995) Add (deduct) items not involving cash Amortization of property plant and equipment 536 604 1,646 1,800 Amortization of license technology 100 - 187 - Amortization of patents and trademarks 28 21 98 81 Amortization of deferred charges 115 1,252 1,823 3,747 Stock based compensation 1,411 - 2,464 - Future tax liability (1,946) - (2,975) - Minority interest (424) - (680) - Net gain on Arrangement - - (6,838) - Foreign currency translation (gain) loss 3 (2) (6) 283 ------------------------------------------------------------------------- (3,773) (2,109) (9,943) (18,084) Net changes in non-cash working capital balances related to operations 369 (464) (1,630) (5,590) ------------------------------------------------------------------------- Cash used in operating activities (3,404) (2,573) (11,573) (23,674) ------------------------------------------------------------------------- ------------------------------------------------------------------------- INVESTING ACTIVITIES Patent and trademark costs - (92) (4) (187) Purchase of property, plant and equipment (169) (172) (424) (8,332) Purchase of license technology - - (1,502) - Proceeds from Arrangement, net of transaction costs - - 12,898 - Proceeds from short term investments 6,965 - - - ------------------------------------------------------------------------- Cash provided by (used in) investing activities 6,796 (264) 10,968 (8,519) ------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds on issuance of common shares - - 180 - Proceeds from loan - 3,000 - 16,000 Cash released from escrow - - 448 - Deferred charges - - - (29) ------------------------------------------------------------------------- Cash provided by financing activities - 3,000 628 15,971 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Effect of exchange rates on cash (3) 2 6 (283) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 3,389 165 29 (16,505) Cash and cash equivalents, beginning of period 4,765 909 8,125 17,579 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 8,154 1,074 8,154 1,074 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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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