Vasogen Announces Third Quarter 2009 Results

MISSISSAUGA, ON, Oct. 15  /PRNewswire-FirstCall/ -- Vasogen Inc. (NASDAQ:VSGN; TSX:VAS) today reported the results of operations for the three and nine months ended August 31, 2009. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.

At August 31, 2009, our cash and cash equivalents totaled $4.8 million, compared with $5.8 million at May 31, 2009. Our net cash used in operating activities for the three months ended August 31, 2009, was $1.0 million and included the payment of $0.4 million for fees mainly related to our ongoing strategic review and $0.3 million for restructuring costs.

The net loss for the third quarter of 2009 was $1.2 million, or $0.05 per common share, compared with a net loss of $2.6 million, or $0.12 per common share for the same period in 2008. The $1.2 million loss for the three months ended August 31, 2009 included a charge for fees of $0.7 million mainly related to our ongoing strategic review, which included the cost of the fairness opinion rendered by JMP Securities LLC in connection with the proposed business combination with IntelliPharmaCeutics.

We incurred a net loss for the nine months ended August 31, 2009 of $4.5 million, or $0.20 per common share, compared with a net loss of $15.3 million, or $0.68 per common share for the same period in 2008. The loss for the nine months ended August 31, 2009 has decreased when compared with the same period in 2008 due to the significant restructuring expenditures that were incurred during 2008 and the resulting lower number of employees in 2009. A portion of this decrease also relates to a $1.2 million non-cash provision taken against our clinical supplies during the nine months ended August 31, 2008.

  Corporate Update

  -   On Monday August 17, 2009, Vasogen Inc., IntelliPharmaCeutics Ltd.
      ("IPC US") and IntelliPharmaCeutics Corp. ("IPC Opco" and together
      with IPC US, "IPC") announced that they had entered into an
      arrangement agreement, (the "IPC Arrangement Agreement"), which is
      subject to shareholder and regulatory approvals, whereby Vasogen will
      combine with IPC under a plan of arrangement (the "Plan of
      Arrangement") and merger to continue as a publicly-traded entity to
      be called IntelliPharmaCeutics International Inc. ("New IPC"). IPC
      are privately-held specialty pharmaceutical companies that are
      focused on developing and manufacturing new and generic controlled-
      release pharmaceutical products using its broadly applicable,
      proprietary delivery technologies. Currently, IPC has 15 product
      candidates in its development pipeline several of which are partnered
      with third-party drug companies. IPC's lead product candidates
      include Dexmethylphenidate XR, a generic version of the marketed drug
      Focalin XR(R), which is partnered with Par Pharmaceutical and is
      currently the subject of an Abbreviated New Drug Application (ANDA)
      filing with the U.S. Food and Drug Administration (FDA), and
      Carvedilol CR, a generic version of the brand name drug Coreg CR, an
      internal pipeline now in pivotal bioequivalence studies.

  -   On August 17, 2009, we also announced we had entered into an
      arrangement agreement, subject to shareholder, unitholder and
      regulatory approvals, with Cervus LP (TSXV:CVL.UN), an Alberta based
      limited partnership, and its general partner Cervus GP Ltd. (the
      "Cervus Arrangement Agreement"), that will reorganize Vasogen prior
      to completion of the transaction with IPC pursuant to the Plan of
      Arrangement, and which will provide gross proceeds to Vasogen of
      approximately $7.5 million in non-dilutive capital.

  -   On August 11, 2009, the Staff of the NASDAQ Listing Qualifications
      Department (the "Staff") notified the Company that it had not
      regained compliance with the $1.00 minimum bid price requirement set
      forth in Listing Rule 5550 (a)(2). On September 15, 2009, the Staff
      further notified Vasogen that it believes the proposed transaction
      with IPC is a business combination that will result in a "change of
      control" and accordingly, under NASDAQ Listing Rule 5110(a), requires
      that the post-combination entity apply and be approved for initial
      listing on NASDAQ. Under NASDAQ's rules, if the Staff determines that
      the post-combination entity does not qualify for initial listing, it
      will be subject to delisting. Accordingly, on September 16, 2009, an
      initial listing application was submitted to the NASDAQ Listing
      Qualifications Department on behalf of the combined entity; the
      application remains pending. On September 23, 2009, the parties
      appeared before a NASDAQ Listing Qualifications Panel ("the Panel")
      and presented their plan to comply with the minimum bid price
      requirement and the initial listing requirements upon consummation of
      the transaction. To date, the Panel has not rendered a decision.
      Pending the Panel's decision, Vasogen's securities remain listed on
      NASDAQ.

  -   To further reduce the rate at which we use our cash during our
      strategic review process, the employment of Graham Neil, our Vice-
      President, Finance, and CFO, was terminated effective July 14, 2009.
      Mr. Neil has agreed to fulfill the role of CFO, in a consulting
      capacity at substantially reduced compensation, to assist the board
      of directors (the "Board") in bringing closure to the ongoing
      strategic review process.



We will conduct a live webcast presentation of our Special Meeting of Shareholders being held at the offices of McCarthy Tetrault, LLP, Suite 5300, Toronto Dominion Bank Tower, 66 Wellington Street West, Toronto, on Monday, October 19, 2009 at 10:00 a.m. ET. To participate via webcast, please go to http://www.vasogen.com/. A re-broadcast of the presentation will be available at http://www.vasogen.com/.

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 include, without limitation, our plans to complete the business combination resulting from our strategic review, which is described in the press release dated August 17, 2009, statements regarding the status of development, or expenditures relating to our business, 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 for the year ended November 30, 2008, as well as in our other public filings, including our Management's Discussion and Analysis for the period ended August 31, 2009. 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 unaudited interim consolidated financial statements, accompanying notes to the unaudited interim consolidated financial statements, and Management's Discussion and Analysis for the three and nine months ended August 31, 2009, will be accessible on Vasogen's Website at http://www.vasogen.com/ and will be available on SEDAR and EDGAR.

  Summary financial tables are provided below.



  VASOGEN INC.
  (A DEVELOPMENT STAGE COMPANY)

  Interim Consolidated Balance Sheets
  (In thousands of Canadian dollars)

  -------------------------------------------------------------------------
                                                         August   November
                                                       31, 2009   30, 2008
  -------------------------------------------------------------------------
                                                     (Unaudited)
  Assets

  Current assets:
    Cash and cash equivalents                         $   4,843  $   8,556
    Tax credits recoverable                                 422        582
    Prepaid expenses and deposits                           332        188
  -------------------------------------------------------------------------
                                                          5,597      9,326

  Property and equipment                                     12         16

  -------------------------------------------------------------------------
                                                      $   5,609  $   9,342
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------

  Liabilities and Shareholders' Equity

  Current liabilities:
    Accounts payable                                  $     286  $     101
    Accrued liabilities                                   1,047      1,141
  -------------------------------------------------------------------------
                                                          1,333      1,242
  Shareholders' equity
    Share capital:
      Authorized:
        Unlimited common shares, without par value
          Issued and outstanding:
          22,623,195 common shares (November 30, 2008
          - 22,424,719)                                 365,730    365,677
    Warrants                                             16,725     16,725
    Contributed surplus                                  24,172     23,555
    Deficit                                            (402,351)  (397,857)
  -------------------------------------------------------------------------
                                                          4,276      8,100

  -------------------------------------------------------------------------
                                                      $   5,609  $   9,342
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------



  VASOGEN INC.
  (A DEVELOPMENT STAGE COMPANY)

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

  -------------------------------------------------------------------------
                                                               Period from
                                                                December 1,
                        Three months ended    Nine months ended    1987 to
                             August 31,            August 31,    August 31,
                          2009       2008       2009       2008       2009
  -------------------------------------------------------------------------

  Expenses:
    Research and
     development     $       7  $   1,096  $     363  $   8,734  $ 248,074
    General and
     administration      1,150      1,627      4,594      7,237    129,920
    Foreign exchange
     loss (gain)             4        (59)        58       (194)    10,723
  -------------------------------------------------------------------------
  Loss before the
   undernoted           (1,161)    (2,664)    (5,015)   (15,777)  (388,717)
  Interest expense on
   senior convertible
   notes payable             -          -          -          -     (1,279)
  Accretion in
   carrying value of
   senior convertible
   notes payable             -          -          -          -    (10,294)
  Amortization of
   deferred financing
   costs                     -          -          -          -     (3,057)
  Loss on
   extinguishment of
   senior convertible
   notes payable             -          -          -          -     (6,749)
  Gain on sale of
   patents                   -          -        487          -        487
  Investment income          3         78         34        453     13,872
  Change in fair
   value of embedded
   derivatives               -          -          -          -        829
  -------------------------------------------------------------------------
  Loss and
   comprehensive loss
   for the period       (1,158)    (2,586)    (4,494)   (15,324)  (394,908)
  Deficit, beginning
   of period          (401,193)  (394,521)  (397,857)  (381,783)    (1,510)
  Impact of change in
   accounting for
   stock-based
   compensation              -          -          -          -     (4,006)
  Impact of change in
   accounting for
   financial
   instruments               -          -          -          -     (1,632)
  Charge for
   acceleration
   payments on equity
   component of
   senior convertible
   notes payable             -          -          -          -       (295)
  -------------------------------------------------------------------------
  Deficit, end of
   period            $(402,351) $(397,107) $(402,351) $(397,107) $(402,351)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------
  Basic and diluted
   loss per common
   share             $   (0.05) $   (0.12) $   (0.20) $   (0.68)
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------



  VASOGEN INC.
  (A DEVELOPMENT STAGE COMPANY)

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

  -------------------------------------------------------------------------
                                                               Period from
                                                                December 1,
                        Three months ended    Nine months ended    1987 to
                             August 31,            August 31,    August 31,
                          2009       2008       2009       2008       2009
  -------------------------------------------------------------------------
  Cash provided by
   (used in):
  Operating
   activities:
    Loss for
     the period      $  (1,158) $  (2,586) $  (4,494) $ (15,324) $(394,908)
    Items not
     involving cash:
      Amortization           2        191          4        378      6,381
      Loss on
       disposition of
       property and
       equipment             -          -          -          -        125
      Gain on sale
       of patents            -          -       (487)         -       (487)
      Accretion in
       carrying value
       of senior
       convertible
       notes payable         -          -          -          -     10,294
      Amortization of
       deferred
       financing costs       -          -          -          -      3,057
      Loss on
       extinguishment
       of senior
       convertible
       notes payable         -          -          -          -      6,749
      Change in fair
       value of
       embedded
       derivatives           -          -          -          -       (829)
      Stock-based
       compensation         51        141        617        692     11,007
      Common shares
       issued for
       services              -          -          -          -      2,485
      Unrealized
       foreign exchange
       gain (loss)           4        (98)        56         61     11,475
      Other                  -          -          -          -        (35)
  Change in non-cash
   operating working
   capital                 114       (348)       156        493        594
  -------------------------------------------------------------------------
                          (987)    (2,700)    (4,148)   (13,700)  (344,092)
  Financing activities:
    Shares and warrants
     issued for cash         -          -          -          -    326,358
    Warrants exercised
     for cash                -          -          -          -     16,941
    Options exercised
     for cash                -          -          -          -      7,669
    Share issue costs        -          -          -          -    (24,646)
    Repayment of
     senior convertible
     notes payable, net      -          -          -          -     38,512
    Paid to related
     parties                 -          -          -          -       (234)
  -------------------------------------------------------------------------
                             -          -          -          -    364,600
  Investing activities:
    Purchases of
     property and
     equipment               -          -          -         (6)    (2,471)
    Purchases of
     acquired technology     -          -          -          -     (1,283)
    Proceeds on
     disposition of
     patents                 -          -        487          -        487
    Purchases of
     marketable
     securities              -          -          -          -   (244,846)
    Proceeds on
     disposition of
     property and
     equipment               -          -          -          -         62
    Settlement of
     forward foreign
     exchange contracts      -          -          -          -     (4,824)
    Maturities of
     marketable securities   -          -          -          -    240,677
  -------------------------------------------------------------------------
                             -          -        487         (6)   (12,198)
  Foreign exchange
   gain (loss) on cash
   held in foreign
   currency                 (4)        99        (52)       (51)    (3,467)
  -------------------------------------------------------------------------
  Increase (decrease) in
   cash and cash
   equivalents            (991)    (2,601)    (3,713)   (13,757)     4,843
  Cash and cash
   equivalents,
   beginning
   of period             5,834     12,389      8,556     23,545          -
  -------------------------------------------------------------------------
  Cash and cash
   equivalents, end
   of period         $   4,843  $   9,788  $   4,843  $   9,788  $   4,843
  -------------------------------------------------------------------------
  -------------------------------------------------------------------------


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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