Hemosol (NASDAQ:HMSL)
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Hemosol Announces Fourth Quarter and Full Year 2003 Financial Results
TORONTO, March 11 /PRNewswire-FirstCall/ -- Hemosol Inc. today announced
financial results and a review of operational highlights for the fourth quarter
and year ended December 31, 2003. Unless otherwise stated, all dollar amounts
presented herein are in Canadian dollars.
The Company's net loss decreased slightly to $10.9 million, or ($0.22) per
share, for the quarter ended December 31, 2003 from $11.4 million or ($0.25) per
share for the quarter ended December 31, 2002. The loss in the quarter included
a write-down of certain assets, including property, plant and equipment,
inventory and patents and trademarks, of $6.5 million. Net losses for the year
were $34.9 million ($0.75 per share) versus $54.8 million ($1.23 per share) in
the prior year.
Total operating expenses for the quarter ended December 31, 2003 (excluding the
previously mentioned asset write downs of $6.5 million) decreased by 63% to $3.9
million from $10.5million for the quarter ended December 31, 2002, bringing
operating expenses for the year ended December 31, 2003 to $25.6 million versus
$47.4 million in the prior year. The lowering of operating expenses resulted
from cost savings plans implemented in both June 2002 and April 2003 which have
reduced the Company's average monthly burn to approximately $1.2 million.
"The Company has commenced a number of strategic initiatives designed to allow
Hemosol to realize value from its existing asset base and move the Company
forward," said Lee Hartwell, Chief Executive Officer of Hemosol. "Leveraging the
technological strength of our manufacturing team coupled with our
state-of-the-art Meadowpine facility, we were able to forge the principal terms
of a strategic alliance for the production of therapeutic blood products that
will provide significant opportunities over the mid-term. Combined with the
agreement with MDS allowing us to recognize value from accumulated tax losses
and other tax assets, the Company will be well positioned to pursue a
three-pronged value creation strategy, which includes advancing development of
products across our pipeline, including HEMOLINK(TM) (hemoglobin raffimer),
pursuing bio-manufacturing opportunities, and capitalizing on our alliance with
ProMetic Life Sciences Inc. ("ProMetic") and the American National Red Cross
("ARC").
In December, Hemosol forged the principal terms of a strategic alliance with
ProMetic and its strategic co-development partner, the ARC, to in-license their
novel plasma separation technology. The Cascade purification process permits the
recovery of valuable proteins from human plasma. The annual market for proteins
that can be isolated using the Cascade technology is estimated to be worth in
excess of US $5 billion and continues to grow. Under the terms of the exclusive
North American agreement, the Cascade technology will be utilized at Hemosol's
state-of-the-art Meadowpine manufacturing facility. The ARC and Hemosol will
enter into a separate agreement for the supply of plasma and the purchase of the
therapeutic products isolated using the Cascade technology. The organizations
are working toward concluding the definitive agreement and are proceeding with
the technology transfer.
Hemosol is also actively pursuing opportunities to generate revenue by providing
bio-manufacturing services to other bio-pharmaceutical companies. The Company
believes there is considerable demand for facilities and expertise in
engineering and quality assurance/control in this sector.
Improving Financial Strength
On November 28th, Hemosol completed the sale of 7,841,800 special warrants at a
price of $0.75 per special warrant for gross proceeds of $5,881,350. Each
special warrant consisted of one commonshare and one-half of one warrant. Each
whole warrant entitles the holder to purchase one common share for $0.90 at any
time within 36 months of the closing of the transaction. Hemosol initially
received $5,400,000 on closing of the transaction, and subsequently received
$481,350, which had been held in escrow pending shareholder approval, which was
granted on January 22nd, 2004.
Subsequent to the year-end, Hemosol announced that it had entered into an
agreement with MDS Inc. (TSX: MDS, NYSE: MDZ) regarding a proposed transaction
that will allow Hemosol's business to effectively exchange a significant portion
of the existing and unutilized income tax losses and other tax assets for a $16
million dollar cash infusion. The transaction will be effected under a statutory
Plan of Arrangement and is subject to certain approvals, including that of
shareholders and warrantholders of Hemosol, who will vote at a special meeting
of the Company to be held on April 20, 2004. Details of the transaction will be
included in the information circular to be mailed to the Hemosol Inc.
securityholders in connection with the special meeting.
"The completion of these initiatives to re-capitalize the Company, will
significantly strengthen our balance sheet and facilitate the execution of our
strategy in the year ahead," said Lee Hartwell.
More Financial Results
The Company incurred interest expense of $221,000 for the quarter ended December
31, 2003 versus interest income of $156,000 for the quarter ended December 31,
2002. Interest expense for the year ended December 31, 2003 was $535,000 versus
interest income of $842,000 in the prior year. The increase in interest expense
was due to the Company drawing down its $20 million credit facility as well as
lower balances in cash and cash-equivalents.
Amortization of deferred charges increased to $1.3 million for the quarter ended
December 31, 2003 from $0.8 million for the quarter ended December 31, 2002.
Amortization of deferred charges for the year ended December 31, 2003 were $5.0
million versus $1.6 million in the prior year. The increase in amortization
relates to charges associated with the $20 million credit facility.
In the fourth quarter the Company realized $1.1 million of miscellaneous income
related to the sale of certain equipment at its old manufacturing facility.
Miscellaneous income for the full year ended December 31, 2003 totalled $2.9
million which included $1.8 million of net proceeds from an insurance policy
received in the third quarter.
The Company incurred a total of $0.03 million in capital expenditures during the
quarter ended December 31, 2003, bringing capital expenditures for the year
ended December 31, 2003 to $1.9 million versus $30.4 million in the prior year.
Of this $0.2 million related to production equipment, information technology and
various lab equipment expenditures and $1.7 million relating to the new
facility. During the year, the company wrote-off costs of $4.7 million for
impaired equipment related to the near term commercial production of
HEMOLINK(TM). This brings total capital assets net of depreciation to $83.9
million at December 31, 2003, of which $81.7 million relates to the new
facility.
Annual and Special Meeting
Hemosol will hold its Annual and Special Meeting of Shareholders at the TSX
Broadcast Centre, Gallery Room, 130 King Street West, Toronto, Ontario,
beginning at 10:00 am (EST) on April 20th, 2004.
If you are unable to attend the Meeting, a live audio version will be available
on the Internet. To access the live webcast please visit http://www.hemosol.com/
or http://www.financialdisclosure.ca/. The broadcast will be archived for up to
twelve months. To listen to the presentation you will need a standard web
browser equipped with Windows media player.
Financial Statements to Follow:
CONSOLIDATED BALANCE SHEETS
As at December 31
2003 2002
$ (000's) $
-------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents 8,125 17,579
Cash held in escrow 448 5,000
Amounts receivable and prepaids 735 1,077
Inventory 1,274 2,877
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TOTAL CURRENT ASSETS 10,582 26,533
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Property, plant and equipment, net 83,881 88,907
Patents and trademarks, net 1,368 2,176
License Technology 2,520 -
Deferred charges, net 2,026 6,696
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TOTAL OTHER ASSETS 89,795 97,779
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100,377 124,312
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities 3,394 15,249
Short term debt 20,000 -
Debentures payable - 5,000
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TOTAL CURRENT LIABILITIES 23,394 20,249
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SHAREHOLDERS' EQUITY
Common Shares 305,983 303,463
Non-employee warrants and options 15,642 10,300
Contributed surplus 8,535 8,535
Deficit (253,177) (218,235)
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TOTAL SHAREHOLDERS' EQUITY 76,983 104,063
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100,377 124,312
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CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
THREE MONTH TWELVE MONTH
PERIOD ENDED PERIOD ENDED
--------------------- ---------------------
December December December December
31, 31, 31, 31,
2003 2002 2003 2002
$ $ $ $
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EXPENSES
Research and development
Scientific and process 2,597 2,600 10,773 15,271
Regulatory and clinical 353 4,618 5,817 17,173
Administration 1,416 1,312 6,586 6,115
Marketing and business
development 213 1,051 1,760 6,018
Support services 235 873 1,297 2,602
Write-off of property,
plant and equipment 4,654 - 4,654 -
Write-off of patents & trademarks 846 - 846 -
Foreign currency translation
loss (gain) 97 63 380 246
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Loss from operations
before the following 10,411 10,517 32,113 47,425
Amortization of deferred charges 1,262 836 5,009 1,587
Write-off of deferred charges - - - 6,453
Interest income (19) (156) (153) (842)
Interest expense 240 - 688 -
Miscellaneous Income (1,103) - (2,871) -
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Loss before income taxes 10,791 11,197 34,786 54,623
Provision for income taxes 156 211 156 211
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NET LOSS FOR THE PERIOD 10,947 11,408 34,942 54,834
Deficit, beginning of period 242,230 206,827 218,235 163,401
-------------------------------------------------------------------------
DEFICIT, END OF PERIOD 253,177 218,235 253,177 218,235
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BASIC AND DILUTED LOSS
PER SHARE 0.22 0.25 0.75 1.23
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WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
outstanding (000's) 49,012 46,066 46,837 44,514
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CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTH TWELVE MONTH
PERIOD ENDED PERIOD ENDED
--------------------- ---------------------
December December December December
31, 31, 31, 31,
2003 2002 2003 2002
(000's) (000's)
-------------------------------------------------------------------------
Net loss for the period (10,947) (11,408) (34,942) (54,834)
-------------------------------------------------------------------------
Cash used in operating
activities (2,646) (8,030) (26,655) (40,359)
-------------------------------------------------------------------------
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Cash provided by (used in)
investing activities 1,086 (5,320) (7,433) 35,026
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Cash providedby financing
activities 8,555 (434) 24,555 20,179
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Effect ofexchange rates on
cash and cash equivalents 56 131 79 (52)
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Net increase (decrease) in
cash and cash equivalents
during the period 7,051 (13,653) (9,454) 14,794
Cash and cash equivalents,
beginning of period 1,074 31,232 17,579 2,785
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Cash and cash equivalents,
end of period 8,125 17,579 8,125 17,579
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About HemosolInc.
Hemosol is a biopharmaceutical company focused on the development and
manufacturing of biologics, particularly blood-related proteins. The Company has
a broad range of novel therapeutic products in development, including
HEMOLINK(TM) (hemoglobinraffimer), an oxygen therapeutic designed to rapidly
and safely improve oxygen delivery via the circulatory system. Hemosol also is
developing additional oxygen therapeutics, a hemoglobin-based drug delivery
platform to treat diseases such as hepatitisC and cancers of the liver, and a
cell therapy program initially directed to the treatment of cancer. Hemosol
intends to leverage its expertise in manufacturing blood proteins and its
state-of-the-art Meadowpine manufacturing facility to seek additional strategic
growth opportunities.
For more information visit Hemosol's website at http://www.hemosol.com/.
Hemosol Inc.'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".
HEMOLINK is a registered trademark of Hemosol Inc.
Certain statements concerning Hemosol's future prospects are "forward-looking
statements" under the United States Private Securities Litigation Reform Act of
1995. There can be noassurances that future results will be achieved, and
actual results could differ materially from forecasts and estimates. Important
factors that could cause Hemosol's actual results to differ materially from
forecasts and estimates include, but are notlimited to: the successful and
timely completion of the preclinical and clinical development of its products;
Hemosol's ability to obtain regulatory approvals for its products; Hemosol's
ability to manufacture or have manufactured its product in commercial quantities
and at competitive costs; the competitive environment for therapeutic and
non-therapeutic protein products derived from human blood; the ability to obtain
adequate funding under acceptable terms to complete its development programs;
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 Canadiansecurities 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 Inc.
CONTACT: Jason Hogan, Investor Relations,
(416) 361-1331, 800-789-3419, (416) 815-0080 fax, ,
http://www.hemosol.com/;
To request a free copy of this organization's annual report, please go to
http://www.newswire.ca/ and click on reports@cnw.