Hemosol (NASDAQ:HMSL)
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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
$ $
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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
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Total current assets 6,925 10,582
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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
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96,392 100,377
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 2,538 3,394
Short-term debt 20,000 20,000
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Total current liabilities 22,538 23,394
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Minority interest 5,163 -
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Total liabilities 27,701 23,394
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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)
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Total shareholders' equity 68,691 76,983
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96,392 100,377
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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
$ $ $
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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
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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) -
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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) - -
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(3,523) 156 211
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Net loss for the year 10,148 34,942 54,834
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Basic and diluted loss per share $ 0.18 $ 0.75 $ 1.23
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Weighted average number of
common shares outstanding 56,664 46,837 44,514
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CONSOLIDATED STATEMENTS OF DEFICIT
Years ended December 31
(in thousands of dollars)
2004 2003 2002
$ $ $
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Deficit, beginning of year 253,177 218,235 163,401
Net loss for the year 10,148 34,942 54,834
Distribution 2,900 - -
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Deficit, end of year 266,225 253,177 218,235
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Hemosol Corp.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(in thousands of dollars)
2004 2003 2002
$ $ $
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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
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(14,010) (21,526) (44,177)
Net change in non-cash working capital
balances related to operations (542) (5,129) 3,818
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Cash used in operating activities (14,552) (26,655) (40,359)
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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)
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Cash provided by (used in)
investing activities 10,017 (7,433) 35,026
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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 -
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Cash provided by financing activities 671 24,555 20,179
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Effect of exchange rates on cash and
cash equivalents (31) 79 (52)
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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
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Cash and cash equivalents, end of year 4,230 8,125 17,579
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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.