Vasogen Announces 2008 Year-End Results

MISSISSAUGA, ON, Feb. 27  /PRNewswire-FirstCall/ -- Vasogen Inc. (NASDAQ:VSGN; TSX:VAS) today reported the results of operations for the fiscal year ended November 30, 2008. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.

At November 30, 2008, our cash and cash equivalents totaled $8.6 million, compared with $23.5 million at November 30, 2007 and $9.8 million at August 31, 2008. As of January 31, 2009, our cash balance was $8.5 million.

The net loss for the fourth quarter of 2008 was $0.8 million, or $0.03 per common share. We incurred a net loss for the year ended November 30, 2008 of $16.1 million, or $0.72 per common share, compared with a net loss of $28.8 million, or $1.46 per common share for the same period in 2007. A key driver of this decrease was lower compensation costs, reduced stock compensation expense, lower infrastructure and other support costs driven by lower employee numbers in 2008, and a decrease in the foreign exchange loss that was incurred in the prior period. In addition, the decrease was impacted by a reduction in expenses resulting from the repayment of the senior convertible notes in April 2007.

  Corporate Update

  -   During 2008, we implemented our restructuring plan to significantly
      reduce the rate at which we use our cash and to focus our efforts on
      opportunities that the Board and Management believe are most likely
      to provide shareholder value. As a result, we discontinued
      maintaining the necessary quality processes and personnel to support
      European commercialization and any clinical development of our
      Celacade technology, materially reduced expenses associated with the
      VP series of drugs, and reduced the number of full-time employees
      from 104 to six. We also retained JMP Securities LLC to assist in
      exploring potential strategic alternatives. To further reduce the
      rate at which we use our cash during our strategic review process, in
      February 2009, we further reduced our number of full-time employees
      to two. As part of this restructuring, Chris Waddick, our President
      and CEO, will be terminated effective March 1, 2009. Mr. Waddick has
      agreed to fulfill the role of CEO, in a consulting capacity at a
      substantially reduced compensation, to assist the Board in bringing
      closure to the ongoing strategic review process.

  -   Pursuant to our restructuring plan, our Board of Directors and
      Management has been actively involved in a process of screening,
      reviewing, and short-listing potential opportunities including the
      sale of the Company, or a merger or acquisition, and exploring the
      monetization of certain tangible and intangible assets. The process
      has also included a review of the potential out-licensing of assets,
      lapsing of patents and patent applications, asset divestiture, or
      liquidation of the Company. At this time, we have significantly
      narrowed down the number of third party proposals under
      consideration. If a definitive agreement that the Board believes is
      in the best interest of our shareholders cannot be reached in the
      near future, the Board will consider the other alternatives that it
      has been evaluating. These alternatives include the potential to
      realize value from the monetization of certain intangible assets
      either alone or potentially in combination with a strategic
      transaction. The Board will continue to assess the merits of these
      options relative to liquidating the Company and distributing the
      remaining cash to the shareholders.

  -   As part of our restructuring, a new tenant was secured for our
      37,111 sq. ft. leased facility located at 2505 Meadowvale Boulevard
      in Mississauga, Ontario, and we completed a lease surrender agreement
      with our landlord. As a result, our lease for this facility
      terminated on September 30, 2008 and our new corporate address is
      4 Robert Speck Parkway, 15th Floor, Mississauga, Ontario, L4Z 1S1.

  -   On April 24, 2008, we received a letter from the Listing
      Qualifications Department of The NASDAQ Stock Market indicating that
      the minimum closing bid price of our common stock had fallen below
      US$1.00 for 30 consecutive trading days, and therefore, we were not
      in compliance with Marketplace Rule 4310(c)(4) (the "Rule"). In
      accordance with the NASDAQ Marketplace Rule 4310(c)(8)(D), we were
      provided a compliance period of 180 calendar days, or until
      October 21, 2008, to regain compliance with this requirement. In
      October 2008, the NASDAQ Stock Market had suspended the enforcement
      of the rules requiring a minimum US$1.00 closing price until
      January 20, 2009. Subsequently, on December 9, 2008, the NASDAQ
      extended this suspension. Accordingly, the NASDAQ will not take
      action to delist any security, including our shares, for a violation
      of the minimum bid price rule during the suspension, which now has
      been extended until April 20, 2009.

  -   As at November 30, 2008, we had cash and cash equivalents of
      $8.6 million and had 22.4 million common shares issued and
      outstanding. Other than our accounts payable and accrued liabilities
      we do not have any debt. As of January 31, 2009, our cash balance was
      $8.5 million.

  -   Subsequent to November 30, 2008 we entered into an agreement to sell
      a United States patent application and its related foreign
      counterparts for US$0.4 million. This device-based intellectual
      property has not been used to date in the Celacade System; however,
      we have retained rights to this technology for any potential use as
      it relates to its Celacade System.



Certain statements in this document constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and/or "forward-looking information" under the Securities Act (Ontario). These statements may include, without limitation, plans to consider a sale, merger, acquisition, or other alternatives resulting from our strategic review, statements regarding the status of development, or expenditures relating to the Celacade(TM) System or our VP series of drugs including VP015 and VP025, plans to fund our current activities, statements concerning our partnering activities, health regulatory submissions, strategy, future operations, future financial position, future revenues and projected costs. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimated", "predicts", "potential", "continue", "intends", "could", or the negative of such terms or other comparable terminology. We made a number of assumptions in the preparation of these forward-looking statements. You should not place undue reliance on our forward-looking statements, which are subject to a multitude of risks and uncertainties that could cause actual results, future circumstances or events to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the outcome of our strategic review, securing and maintaining corporate alliances, the need for additional capital and the effect of capital market conditions and other factors, including the current status of our programs, on capital availability, the potential dilutive effects of any financing and other risks detailed from time to time in our public disclosure documents or other filings with the Canadian and U.S. securities commissions or other securities regulatory bodies. Additional risks and uncertainties relating to our Company and our business can be found in the "Risk Factors" section of our Annual Information Form and Form 20-F, as well as in our other public filings, including our Management's Discussion and Analysis for the year ended November 30, 2008. The forward-looking statements are made as of the date hereof, and we disclaim any intention and have no obligation or responsibility, except as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The consolidated financial statements, accompanying notes to the consolidated financial statements, and Management's Discussion and Analysis for the year ended November 30, 2008, will be accessible on Vasogen's web site at http://www.vasogen.com/ and will be available on SEDAR and EDGAR.

                 Financial statements are provided below

  Vasogen Inc.
  (A DEVELOPMENT STAGE COMPANY)

  Consolidated Balance Sheets
  (In thousands of Canadian dollars)

  November 30, 2008 and 2007

  -------------------------------------------------------------------------
                                                         2008         2007
  -------------------------------------------------------------------------
  Assets

  Current assets:
    Cash and cash equivalents                      $    8,556   $   23,545
    Clinical supplies                                       -        1,363
    Tax credits recoverable                               582        1,565
    Prepaid expenses and deposits                         188          787
    Change in fair value of forward foreign
     exchange contracts                                     -          376
    -----------------------------------------------------------------------
                                                        9,326       27,636

  Property and equipment                                   16          414

  -------------------------------------------------------------------------
                                                   $    9,342   $   28,050
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Liabilities and Shareholders' Equity

  Current liabilities:
    Accounts payable                               $      101   $    1,175
    Accrued liabilities                                 1,141        3,519
    -----------------------------------------------------------------------
                                                        1,242        4,694

  Shareholders' equity
    Share capital:
      Authorized:
        Unlimited common shares, without par value
      Issued and outstanding:
        22,424,719 common shares (2007 - 22,391,386)  365,677      365,670
    Warrants                                           16,725       16,725
    Contributed surplus                                23,555       22,744
    Deficit                                          (397,857)    (381,783)
  -------------------------------------------------------------------------
                                                        8,100       23,356

                                                   $    9,342   $   28,050
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------



  VASOGEN INC.
  (A DEVELOPMENT STAGE COMPANY)

  Consolidated Statements of Operations, Deficit and Comprehensive Income
  (In thousands of Canadian dollars, except per share amounts)


  -------------------------------------------------------------------------
                                                               Period from
                                                                December 1,
                                                                   1987 to
                                   Years ended November 30,    November 30,
                               2008         2007         2006         2008
  -------------------------------------------------------------------------
  Expenses:
    Research and
     development         $    8,794   $   12,039   $   32,732   $  247,711
    General and
     administration           8,098       14,259       19,251      125,326
    Foreign exchange
     loss (gain)               (305)       1,977          104       10,665
  -------------------------------------------------------------------------

  Loss before the
   undernoted               (16,587)     (28,275)     (52,087)    (383,702)
  Interest expense on
   senior convertible
   notes payable                  -           (5)        (930)      (1,279)
  Accretion in carrying
   value of senior
   convertible notes
   payable                        -         (728)      (7,824)     (10,294)
  Amortization of
   deferred financing
    costs                         -         (154)      (2,495)      (3,057)
  Loss on extinguishment
   of senior convertible
   notes payable                  -       (1,754)      (4,995)      (6,749)
  Investment income             513        1,310        1,971       13,838
  Change in fair value
   of embedded
   derivatives                    -          829            -          829
  -------------------------------------------------------------------------

  Loss and comprehensive
   loss for the period      (16,074)     (28,777)     (66,360)    (390,414)

  Deficit, beginning of
   period:
    As originally reported (381,783)    (351,374)    (284,719)      (1,510)
    Impact of change in
     accounting for stock-
     based compensation           -            -            -       (4,006)
    Impact of change in
     accounting for
     financial instruments
     on December 1, 2006          -       (1,632)           -       (1,632)
  ------------------------------------------------------------
    As revised             (381,783)    (353,006)    (284,719)

  Charge for acceleration
   payments on equity
   component of senior
   convertible notes
   payable                        -            -         (295)        (295)

  -------------------------------------------------------------------------
  Deficit, end of period $ (397,857)  $ (381,783)  $ (351,374)  $ (397,857)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Basic and diluted loss
   per common share      $    (0.72)  $    (1.46)  $    (7.05)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------


  VASOGEN INC.
  (A DEVELOPMENT STAGE COMPANY)

  Consolidated Statements of Cash Flows
  (In thousands of Canadian dollars)

  -------------------------------------------------------------------------
                                                               Period from
                                                                December 1,
                                                                   1987 to
                                 Years ended November 30,      November 30,
                               2008         2007         2006         2008
  -------------------------------------------------------------------------
  Cash provided by (used in):

  Operating activities:
    Loss for the period  $  (16,074)  $  (28,777)  $  (66,360)  $ (390,414)
    Items not involving
     cash:
      Amortization              217          503          782        6,377
      Loss on disposition
       of property and
        equipment               125            -            -          125
      Accretion in
       carrying value
       of senior
       convertible notes
       payable                    -          728        7,824       10,294
      Amortization of
       deferred financing
       costs                      -          154        2,495        3,057
      Loss on extinguishment
       of senior convertible
       notes payable              -        1,754        4,995        6,749
      Change in fair value
       of embedded
       derivatives                -         (829)           -         (829)
      Stock-based
       compensation             811        1,995        3,083       10,390
      Common shares
       issued for services        -            -           36        2,485
      Unrealized gain on
       forward foreign
       exchange contract        376         (376)           -            -
      Unrealized foreign
       exchange loss (gain)    (124)       2,566          (65)      11,419
      Other                       -            -            -          (35)
    Change in non-cash
    operating working
     capital                   (513)      (3,535)     (17,158)         438
  -------------------------------------------------------------------------
                            (15,182)     (25,817)     (64,368)    (339,944)

  Financing activities:
    Shares and warrants
     issued for cash              -       17,345       23,106      326,358
    Warrants and options
     exercised for cash           -            -            -       24,610
    Share issue costs             -       (1,440)      (2,221)     (24,646)
    Issue (repayment) of
     senior convertible
     notes payable, net           -         (924)      (3,976)      38,512
    Cash released from
     restriction                  -        6,403        5,298            -
    Paid to related parties       -            -            -         (234)
  -------------------------------------------------------------------------
                                  -       21,384       22,207      364,600
  Investing activities:
    Purchases of acquired
     technology                   -            -            -       (1,283)
    Purchases of property and
     equipment                   (6)         (49)         (23)      (2,471)
    Proceeds from disposition
     of property and equipment   62            -            -           62
    Purchases of marketable
     securities                   -            -          (80)    (244,846)
    Settlement of forward
     foreign exchange
     contracts                    -           10         (102)      (4,824)
    Maturities of marketable
     securities                   -            -       23,079      240,677
  -------------------------------------------------------------------------
                                 56          (39)      22,874      (12,685)
  Foreign exchange gain
   (loss) on cash held
   in foreign currency          137       (2,410)        (807)      (3,415)
  -------------------------------------------------------------------------

  Increase (decrease) in
   cash and cash
   equivalents              (14,989)      (6,882)     (20,094)       8,556

  Cash and cash
   equivalents, beginning
   of period                 23,545       30,427       50,521            -
  -------------------------------------------------------------------------
  Cash and cash
   equivalents, end of
   period                $    8,556   $   23,545   $   30,427   $    8,556
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------


DATASOURCE: Vasogen Inc.



CONTACT:  Investor Relations, 4 Robert Speck Parkway, 15th Floor,

Mississauga, ON, L4Z 1S1, tel: [phone], fax: [phone],

http://www.vasogen.com/

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