Vasogen Inc. - Vasogen Announces First Quarter 2005 Results

Vasogen Announces First Quarter 2005 Results

Toronto, Ontario - April 13, 2005

Vasogen Inc. (NASDAQ:VSGN; TSX:VAS), today reported the results of operations for the three months ended February 28, 2005. All dollar amounts referenced herein are Canadian dollars unless otherwise noted.

At February 28, 2005, our cash, cash equivalents, and marketable securities held to maturity totalled $103.9 million, compared with $73.0 million at November 30, 2004. The $30.9 million increase from year end is a result of the proceeds received from our financing completed during the quarter exceeding the cash used in operations. In February 2005, we completed a public offering for gross proceeds of $52.5 million (US$42.3 million), resulting from the issuance of 9.0 million common shares at a price of US$4.70 per share. Net proceeds raised through this offering were approximately $48.8 million. Our cash used in operations for the quarter was $15.1 million or approximately $US 12 million.

We incurred a net loss for the first quarter of 2005 of $19.9 million, or $0.27 per common share, compared with a net loss of $12.1 million, or $0.19 per common share for the first quarter of 2004. The increased loss resulted mainly from higher research and development expenditures associated with the phase III development of our lead product, and the higher corporate costs necessary to support these activities.

For the three months ended February 28, 2005, our research and development expenditures increased to $16.8 million from $9.8 million for the same period in 2004. Our phase III programs in peripheral arterial disease and chronic heart failure were the key drivers behind this increase. Further information about our research and development programs is included in the ‘Highlights’ below.

General and administrative expenditures were $5.4 million in the first quarter of 2005, compared to $3.2 million in the first quarter of 2004. The majority of the increase in G&A expenditures resulted from infrastructure and other costs, which have increased to support our two phase III programs, and preparatory activities for the commercialization of our products.

Our functional currency is the Canadian dollar and funds raised in the financings completed in 2004 and 2005 were in U.S. dollars and are subject to fluctuations in the U.S. exchange rate. A foreign exchange gain of $1.9 million was incurred in the first quarter of 2005, compared with $0.6 million in the first quarter of 2004. This gain is the result of the strengthening of the U.S. dollar relative to the Canadian dollar during the first quarter of 2005 and 2004 in comparison to the rate at year-end. We maintain U.S. dollars in anticipation of significant U.S. dollar denominated R&D expenses with respect to our phase III clinical programs and, therefore, this exchange rate fluctuation, though significant from an accounting point of view, does not affect our ability to pay our U.S. expenditures. An expanded Management’s Discussion and Analysis for the quarter ended February 28, 2005, is accessible on our website at www.vasogen.com and will be available on SEDAR and EDGAR.

Highlights

We announced that we have been granted a European patent covering the use of our Celacade^TM technology for the treatment of chronic heart failure, and we have completed the registration procedure to bring it fully into force in all the major countries of Europe. Patient recruitment in our pivotal phase III ACCLAIM trial in patients with advanced chronic heart failure is nearing completion at over 160 medical centers in North America, Europe, and Israel. This trial is designed to support regulatory approval in North America and commercialization in North America and Europe, where Celacade has been granted the CE Mark, representing regulatory approval for all member countries of the European Union. Chronic heart failure is estimated to affect more than five million people in Europe.
We initiated a phase I clinical trial of VP025, the lead drug candidate from our VP series of drugs. VP025 is being developed to target the chronic inflammation within the central nervous system that is associated with a number of neurological diseases, including Alzheimer’s disease, Parkinson’s disease, and amyotrophic lateral sclerosis (Lou Gehrig’s disease). The double-blind, placebo-controlled phase I clinical trial of VP025 will examine safety and tolerability of various doses of VP025 in up to 24 healthy volunteers. The trial is expected to be completed during the second quarter and, subject to successful outcomes, is expected to form the basis of an application to commence phase II clinical development in patients with neuro-inflammatory disorders. Due to the prevalence, morbidity, and mortality associated with neuro-inflammatory diseases, they represent a significant medical, social, and financial burden.
Preclinical findings demonstrating the ability of VP015, a second formulation from our VP series of drugs, to significantly reverse a measure of the impairment of memory and learning function associated with aging were published in the Journal of Biological Chemistry. The data also showed that the effects of VP015 cross the blood-brain barrier and provide a neuro-protective effect against inflammation within the brain. The findings are based on research conducted at the Department of Physiology of Trinity College in Dublin, Ireland, and describe the role of the cytokine IL-4 in the regulation of age-related inflammatory changes in the brain and the action of VP015 to increase this anti-inflammatory factor.
Reflecting our increased focus on clinical development and preparations for market introduction of our Celacade technology, we announced the appointment of Jay Kleiman, MD, MPA, as Head of Cardiovascular Development and Chief Medical Officer, with overall responsibility for the development of cardiovascular products, and Michael Shannon, MD, MSc, MA, as Vice President of Medical Affairs, with responsibility for providing medical leadership to the Company’s clinical development programs. In his thirty years of medical practice and industry experience as a cardiologist, Dr. Kleiman has demonstrated leadership in both medical products development and health policy. As Medical Director, Cardiovascular/Metabolic Clinical Research for the G.D. Searle Division of Pharmacia (now Pfizer Corporation), he managed a 7,300-patient interventional cardiology outcomes trial (EXCITE), and a 6,600-patient international phase III heart failure trial (EPHESUS) that led to a successful NDA submission. Dr. Shannon also has thirty years of experience in medical leadership roles with government and industry, including a number of senior roles at Health Canada. Dr. Shannon has served as the Director General for the Laboratory Centre for Disease Control at Health Canada, the Chief Medical Advisor to the Assistant Deputy Minister of the Health Protection Branch, and the Director General of the Canadian Blood Secretariat within Health Canada.
In February, we completed a registered direct offering of approximately 9.0 million common shares for gross proceeds of approximately U.S.$42.3 million. SG Cowen & Co., LLC, lead agent and sole book manager; Needham & Company, Inc., co-lead agent; and A.G. Edwards & Sons, Inc. acted as placement agents for the offering.

A conference call will be conducted on April 13, 2005, at 4:30 p.m. Eastern Time. The conference call may be accessed at 416-695-6120 or 1-800-769-8320 ten minutes prior to the call. An audio web cast of the event will also be available at www.vasogen.com. A re-broadcast of the conference call may be accessed by calling 1-877-296-3930, pin code 9793 and will also be available at www.vasogen.com.

About Vasogen:
Vasogen is focused on the research and commercial development of technologies targeting the chronic inflammation underlying cardiovascular and neurological disease. The Company’s lead product, the Celacade^TM technology, is currently in two pivotal phase III clinical trials in life-threatening cardiovascular conditions with significant unmet needs. The 500-patient pivotal phase III SIMPADICO trial, which has completed patient enrollment, is designed to further investigate the use of Celacade technology to improve intermittent claudication, a debilitating symptom associated with peripheral arterial disease. The 2,000-patient pivotal phase III ACCLAIM trial, ongoing at more than 160 clinical centers in North America, Europe, and Israel, is designed to further investigate the use of Celacade technology to reduce the risk of death and hospitalization in patients with advanced chronic heart failure. Vasogen is also developing a new class of drugs for the treatment of neuro-inflammatory disorders, which include such devastating disorders as Parkinson’s disease and Alzheimer’s disease. VP025, the lead product candidate from this new class of drugs, is now in phase I clinical development.

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